Elements of Ratepayer-Funded Low-Income Programs Affordable Comfort May 2005 Jacqueline Berger, APPRISE Incorporated Suzanne Harmelink, WI Energy Conservation Corp.

2 Program Elements 1.Goals: what the program attempting to achieve 2.Program Manager: the organization that is responsible for managing the program 3.Eligibility: who can participate in the program 4.Targeting: what are the characteristics of the customers who the program is trying to reach

3 Program Elements 5.Expenditure per home: how are expenditure levels set and reached 6.Measures: what are the energy-saving measures that are selected 7.Customer education: how are customers involved in the process of reducing energy usage

4 Program Elements 8.Service delivery contractors: number and type of organization(s) used to provide service delivery 9.Service delivery procedures: system for delivering education and measures 10.Data manager: organization responsible for developing and maintaining database

5 Program Elements 11.Data management systems: system for collection and managing customer and program data 12.Quality control: procedures for assessing the quality and consistency of services delivered 13.Evaluation: analysis of how efficiently/ effectively the program is working and the impacts that the program achieved

6 Program Goals Options Energy savings - % of pre-treatment use Reduce ratepayer subsidy Number of homes served Amount spent per home or in the program year Targeting high need customers (elderly, disabled, young children, high energy burden) Innovative usage reduction measures Innovative program delivery systems

7 Program Goals Advantages and Disadvantages Energy Savings –Advantages: sets concrete standards of measurement for program and contractor –Disadvantages: particular level of savings may be difficult reach depending on condition of customer homes and budget constraints

8 Program Goals Advantages and Disadvantages Ratepayer subsidy types –Percentage of income Example: customer pays 8% of income Ratepayers bear all the risk because when bill changes, customer payment is fixed If bill declines due to usage reduction program, all benefits go to the ratepayers

9 Program Goals Advantages and Disadvantages Ratepayer subsidy types –Fixed credit Example: customer receives a credit of $100 on the energy bill each month Customer bears all of the risk, because when bill changes the subsidy is fixed If bill declines due to usage reduction program, all benefits go to the customers

10 Program Goals Advantages and Disadvantages Ratepayer subsidy types –Discounted bill Example: customer receives a 50% discount on the first 500 kWh used each month Ratepayers and customers share the risk because when bills increase both the subsidy and the customer bill increase If bill declines due to usage reduction program, benefits go to ratepayers and customers

11 Program Goals Advantages and Disadvantages Reduce ratepayer subsidy –Advantages: if achieved, the program will result in cost-effective savings for the ratepayers –Disadvantages: if all benefits go to the ratepayers, there may be less motivation for customers to participate in energy reduction strategies

12 Program Goals Advantages and Disadvantages Number of homes served –Advantages: ensure that benefits are distributed to a minimum number of customers –Disadvantages: with a set budget, places limits on the level of services that a household can receive

13 Program Goals Advantages and Disadvantages Amount spent per home –Advantages: ensure that a certain number of homes can be served within the allocated budget –Disadvantages: may not allow enough flexibility to address homes with severe problems

14 Program Goals Advantages and Disadvantages Targeting high need customers –Advantages: provides benefits to those who may suffer most from unaffordable energy bills –Disadvantages: may not provide the most cost- effective program if these are not the highest energy users

15 Program Goals Advantages and Disadvantages Innovative usage reduction measures Innovative program delivery systems –Advantages: allows for testing of these new measures and systems that may prove to be cost-effective in the long-run –Disadvantages: due the to learning curve, program may not be as cost-effective

16 Program Goals Examples NJ Comfort Partners Program –10% average electric savings for electric space heaters –15% average gas savings for gas heaters Ohio Electric Partnership Program –Reduce the costs of PIPP for the Ohio ratepayers

17 Program Goals Examples WI - Targeted Home Performance with ENERGY STAR –Number of homes served –Savings of 28% heating & 11% electric WI - Enhanced Targeted Home Performance with ENERGY STAR –Number of homes served

18 Program Manager Options Public Utility Commission State Utility 3 rd Party Administrator

19 Program Manager Advantages and Disadvantages Centralized program – PUC or State –Advantages Customers across the state receive equivalent benefits Utilities may work together to develop best practices for combined approach –Disadvantages Utilities may not have the same program commitment and involvement May lose utility-specific customer knowledge

20 Program Manager Examples Pennsylvania: Each utility manages its own usage reduction program New Jersey: The Board of Public Utilities manages a statewide usage reduction program Wisconsin: Public Benefits – State Dept of Administration oversees statewide program

21 Program Eligibility Options Income level –Usually 0 – 150% of Federal Poverty Level Housing Types Usage Participation in bill payment assistance programs

22 Program Eligibility Advantages and Disadvantages Income level –Advantages: more restrictive income limits mean that those with the least ability to pay their bills receive services –Disadvantages: more restrictive income limits may mean that the highest use customers are not served

23 Program Eligibility Advantages and Disadvantages Housing types –Advantages: more restrictive housing type selection may allow for more households to receive service –Disadvantages: more restrictive housing type selection may mean that the highest use customers are not served

24 Program Eligibility Advantages and Disadvantages Usage –Advantages: targeting of highest use customers usually results in greatest energy savings –Disadvantages: exclusive focus on usage does not allow for serving those most in need, i.e. lowest income, highest energy burden, elderly, disabled, young children

25 Program Eligibility Advantages and Disadvantages Participation in bill payment assistance programs –Advantages: reductions in usage result in reduction in subsidies that burden the ratepayers –Disadvantages: customers who do not participate in bill assistance will not receive usage reduction benefits

26 Program Eligibility Examples Ohio Electric Partnership Program – must be a PIPP participant and have specified electric usage: –Baseload services: baseload usage > 6,000 kWh –Weatherization services: heating or cooling usage > 6,000 kWh –Moderate use services: baseload usage of 4,000 to 6,000 kWh

27 Program Eligibility Examples WI - Targeted Home Performance with ENERGY STAR –Income Guidelines of % –Single to 4-unit Buildings (owner & rental)

28 Customer Targeting Options Highest use customers Highest subsidy customers Payment troubled customers Vulnerable households (young children, elderly, disabled)

29 Customer Targeting Advantages and Disadvantages Highest use customers –Advantages: usually results in highest energy savings –Disadvantages: may not focus on lower usage customers with high needs due to income, energy burden, other characteristics

30 Customer Targeting Advantages and Disadvantages Highest subsidy customers –Advantages: benefits of the program go to the ratepayers –Disadvantages: other needy customers may not be served

31 Customer Targeting Advantages and Disadvantages Payment troubled customers –Advantages: may increase bill payment coverage rates –Disadvantages: may not result in greatest usage reduction

32 Customer Targeting Advantages and Disadvantages Vulnerable households (young children, elderly, disabled) –Advantages: reduce energy usage for those who may suffer most from unaffordable bills –Disadvantages: may not result in greatest usage reduction

33 Customer Targeting Examples NJ Comfort Partners Program –USF participant –Highest use customers WI - Enhanced Targeted Home Performance with ENERGY STAR –Arrearage requirement

34 Expenditure Per Home Options Comprehensive – maximize savings per home Cost threshold / $ Limit per household Minimal – increase number of households served

35 Expenditure Per Home Advantages and Disadvantages Comprehensive –Advantages Maximize usage reduction for homes served Minimize administrative expenses as a percentage of total costs Achieve most cost-effective program –Disadvantages Fewer homes may be served

36 Expenditure Per Home Advantages and Disadvantages Cost threshold –Advantages Serve a greater number of households Ensure that a minimum number of households are served –Disadvantages Does not take individual household circumstances into account May spend more than what is cost-effective in some homes

37 Expenditure Per Home Advantages and Disadvantages Minimal –Advantages Increase number of households served –Disadvantages Customers may not receive significant savings Administrative costs are duplicated when other programs return to serve the household

38 Expenditure Per Home Examples Ohio Electric Partnership Program –Any cost-effective measure can be installed NJ Comfort Partners –Expenditure guidelines are provided, based on energy usage WI – Targeted Home Performance –Any cost effective measure may be installed

39 Measure - Options Refrigerator/freezer replacement Compact fluorescent light bulbs Aerators/ showerheads Insulation Air sealing Fuel switching – clothes dryer, hot water heater Equipment (Heating System, Water Heater, Central A/C) Custom measures

40 Measures Advantages and Disadvantages Advantages –Any measure that provides cost-effective savings provides benefits to the customer and/or the ratepayer Disadvantages –Installing all cost effective measures will increase program cost –Emphasis on specific measures may neglect other high uses in the home

41 Customer Education Options Partnership between program/educator and customer Understanding the energy bills Energy use and costs around the home Customer goals for usage reduction Customer action plan Follow-up

42 Customer Education Advantages and Disadvantages Partnership between program /educator and customer –Advantages: if successful, customer has more motivation to take steps to reduce energy usage –Disadvantages: takes skilled and dedicated auditor to make it work

43 Customer Education Advantages and Disadvantages Understanding the energy bills Energy use and costs around the home –Advantages If the customer understands how to read the bill and determine when usage is decreasing, it provides positive re-enforcement for energy-saving actions Allows customer to make decisions about energy usage based on the costs of those uses –Disadvantages Requires auditor with good communication skills Increases length of audit

44 Customer Education Advantages and Disadvantages Customer goals for usage reduction Customer action plan –Advantages Provides motivation for customer to reduce energy usage Provides direction for customer –Disadvantages Some customers will not be interested Auditors must be skillful and willing to take the time required

45 Customer Education Examples New Jersey Comfort Partners Program –Education training provided to all auditors –Education notebook and cards –Partnering process –Bill and energy usage education –Customer action plan

46 Customer Education Examples WI - Targeted Home Performance with ENERGY STAR –Partnering process –Customer action plan –Voluntary participation by providers WI – Home Energy Plus Weatherization –Planning phase for comprehensive plan

47 Service Delivery Contractors Options Private contractors Weatherization agencies Community Action Agencies Other nonprofit Mix of the above groups

48 Service Delivery Contractors Advantages and Disadvantages Private contractors –Advantages Cash flow management Data management capabilities Ability to hire additional staff –Disadvantages May have less knowledge/experience with other public programs

49 Service Delivery Contractors Advantages and Disadvantages Weatherization agencies Community Action Agencies Other nonprofit –Advantages: ability to provide joint service delivery with other programs such as WAP –Disadvantages: may not have experience with contract work

50 Service Delivery Contractors Examples Ohio Electric Partnership Program –Allowed private contractors and agencies to bid on program –First year: 18 authorized providers were selected (1 private contractor) –Second through fourth years: 9 authorized providers were selected (1 private contractor)

51 Service Delivery Contractors Examples WI - Targeted Home Performance ENERGY STAR –Allowed weatherization providers first right of refusal (18 of 21 agencies participate) –Invited Home Performance with ENERGY STAR consultants to fill gaps (currently working with three)

52 Service Delivery Procedures Options One visit approach Two visit approach –Visit 1: audit/minor measures –Visit 2: insulation/air sealing Multiple visit approach –Visit 1: audit/minor measures –Visit 2: insulation/air sealing –Visit 3+: equipment/appliance subcontractors

53 Service Delivery Procedures Advantages and Disadvantages Fewer visits –Advantages May be lower cost Lower time investment for customer Reduced opportunity for communication problems –Disadvantages Greater number of providers in the home at one time Requires provider to be skilled in more areas

54 Service Delivery Procedures Examples NJ Comfort Partners Program –Contractor specific –One contractor did all possible in one visit –Primary contractor used 2 visits Visit 1: audit and minor measures Visit 2: air sealing and insulation

55 Service Delivery Procedures Examples WI - Targeted Home Performance with ENERGY STAR –Multiple visits norm –Program provider specific

56 Data Manager Options State managed –Collect data from contractors and store in a common database for the program Contractor managed –Data stored and managed by contractor –Data sent to state/utility or evaluator as needed Utility managed –Collect data from contractors and store at utility

57 Data Manager Advantages and Disadvantages State managed –Advantages Data stored in a central location, not at separate utilities or agencies Data readily available for management, reporting, and evaluation –Disadvantages May be delay in obtaining data from utilities or agencies May be problems with data that state cannot interpret

58 Data Manager Advantages and Disadvantages Contractor managed –Advantages May have a database that has been tested that can be adapted for the program May have expertise and resources for data management Can design and provide detailed reports to program manager –Disadvantages State or utility may not have data readily available for management and reporting Difficult to move program to new or additional contractors

59 Data Manager Examples New Jersey Comfort Partners –Primary contractor maintained data for 7 gas and electric utilities –First Energy had their own data system and also managed data independently –Moving to system where utilities will manage the data

60 Data Manager Examples WI - Targeted Home Performance with ENERGY STAR –Administrator coordinates data collection and management centrally –Data sent upon request to utilities –Data sent to state monthly for evaluation purposes

61 Data Management Systems Options Paper data collection –Data collected on paper at the customer’s home –Data entered by contractor after the visit Computerized data collection –Customer data loaded into software –Data entered in laptop or PDA while in the customer’s home –Data uploaded to data management system

62 Data Management Systems Advantages and Disadvantages Computerized data collection –Advantages Auditor can have customer data (including usage) available on site Data entry is not necessary Software can calculate cost-effectiveness based on customer usage and other characteristics –Disadvantages Computer can interview with customer relationship Data can be lost

63 Data Management Systems Examples Ohio Electric Partnership Program –Data from utilities are screened –Targeted customers are sent to providers –Customers are loaded onto PDA’s or laptops –Data is entered directly into computer during the audit –Data is uploaded to state –Data used for invoicing and program evaluation

64 Data Management Systems Examples WI - Targeted Home Performance with ENERGY STAR –State provides target list of potential customer electronically –Providers submit paper invoices and information for reports –Measure Data is uploaded to state for savings –Data used for invoicing and program evaluation

65 Quality Control Options Internal/External –State or utility personnel –Third party inspectors Sampling –What percent of jobs should be inspected? Targeting –Equal/random inspection of each contractor –Focus on contractors who have shown problems in the past

66 Quality Control Advantages and Disadvantages External quality control –Advantages More time may be devoted to quality control May have more systematic procedures for quality control May be more objective –Disadvantages May be more expensive Inspectors may not have good understanding of program design and procedures

67 Quality Control Examples NJ Comfort Partners –Utilities hire private contractors to conduct third party inspection –Each utility specifies procedures for inspections –Each utility specifies the number or percent of jobs to be inspected

68 Quality Control Examples WI – Targeted Home Performance with ENERGY STAR –Program providers expected to perform post installation final inspection –Program administrator completes % quality assurance site visits WI – Home Energy Plus Weatherization –Program providers expected to perform post installation final inspection –State subcontracts quality assurance site visits to third party

69 Evaluation Options Internal/External –Conducted by state/utility –Conducted by third party evaluator Impact –Energy usage –Bill payment –Environmental –Economic Process –Efficiency/effectiveness of program –Why is the program achieving the outcomes

70 Evaluation Advantages and Disadvantages External –Advantages More time may be devoted to evaluation Evaluation expertise May have more systematic procedures for evaluation May be more objective / less biased –Disadvantages More expensive May not have an understanding of the program and components

71 Evaluation Examples Pennsylvania LIURP Programs –Each utility must submit a usage impact evaluation each year –Most utilities use internal staff to provide evaluation report –One utility uses a private contractor –Process evaluation not currently done

72 Contact us: Jacqueline Berger APPRISE Incorporated Suzanne Harmelink WI Energy Conservation Corporation x210