1. Energy Efficiency and Conservation
Direct Use Program Proposal
For Discussion with EmPOWER Maryland Stakeholders
December 2, 2010

2. Key Message
The direct use of natural gas at the retail level:
Impacts Empower MD electricity reduction goals
Encourages wiser, more efficient use of natural gas
Delivers environmental benefits to the region and the State of Maryland.
Realizes the objective driving DOE to adopt improved methods for measuring energy and GHG impacts

3. Direct Use of Natural Gas is Most Efficient

4. Direct Use of Natural Gas Eliminates Electrical Appliances
Reducing the population of electrical appliances necessarily delivers demand savings
Replacement of Average Heat Pump
Annual Savings: 5,554 kWh
Replacement of Average Hot Water Heater
Annual Savings: 4,875 kWh
Peak Demand Savings: 0.5 kW
Natural Gas Conversions will help the state reach its Empower Maryland goals

5. Cost Effects of End-Use of Natural Gas
Decoupling creates necessary regulatory environment
Neither utility is unduly harmed or advantaged
Usage of natural gas for electric generation creates upward pressure on natural gas prices.
Carbon constraining regulations and abundant natural gas reserves likely to drive expansion of gas-fired generation
Current incentives may increase demand for electricity

6. Space Heating

7. End-use of Natural Gas Delivers Environmental Benefits
Pennsylvania Public Utilities Commission
En Banc Hearing Presentation – Paul Raab, EnergyTools LLC

8. Convert estimated 750 Homes to Natural Gas Space and Water Heating
Program Features
Convert estimated 750 Homes to Natural Gas Space and Water Heating
Utility Paid Incentives Cover
High Efficiency Appliances
Customer Contribution for Average Line Extension
Administered as Part of Washington Gas’s Existing On-Main Conversion Program
Rapid Implementation
Report to MD PSC on Pilot Program Results
Finalize Program Parameters for Full Implementation

9. Example Incentives / Expected Results
Party Contribution
Utility Incentive $8,6001
Customer $4,835 (est.)
Thru 2015
Estimated Participants 750
Expected Annual Savings 7,821 MWh
Expected Demand Savings 375 kW
Est. Annual CO2 Elimination 2,325 tons
1Reflects incentive level identified by PA PUC Fuel Switching Working Group, corresponds to 100% of estimated conversion costs in that market area. Applying this incentive level to the WG market area covers 64% of the estimated cost of conversion.

10. Cost Effectiveness Pennsylvania Working Group Results – Space Heating
Test
Net Benefit
Benefit/Cost Ratio
Total Resource Cost Test – Erie/ Harrisburg
$8,948/$4,763
1.50/1.30
Participant Test – Erie/Harrisburg
$14,048/$9,863
1.79/1.61
Rate Impact Measure Test – Erie/ Harrisburg
$4,080/$2,359
1.14/1.11
Program Administrator Cost Test – Erie/ Harrisburg
1.63/1.38
Pennsylvania Working Group Results – Water Heating
Test
Net Benefit
Benefit/Cost Ratio
Total Resource Cost Test
$6,149
2.80
Participant Test
$7,049
3.07
Rate Impact Measure Test
$1,610
1.17
Program Administrator Cost Test
$5,349
2.57

11. Cost Effective Results
Proposed Program Lifecycle Costs
$8,600 + $333
5,554 kWh * 18 yrs + 4,785 kWh * 10yrs
= 6.0 ¢ / kWh

12. Payback on Customer Investment
$4,835 Customer Contribution
Payback = 5.6 years
“Payback” is not instructive if the cost of electric heat pump and water heater replacement (est. $8,300) is compared to customer contribution under program
Absent incentive program, typical customer payback is 15.7 years
Customer Savings - $855/yr
Gas Furnace will consume 660 therms (90% efficient)
Gas Water heater will consume 250 therms (EF 0.75) 
Electric Heat Pump (HSPF 7.7 or COP 2.2)
Electric Water Heater (EF 0.90)
Base or other annual consumption of 4,485 kWh (EIA, 1993)
Current Pepco MD and WGL MD Tarrifs\Rate
PGC for August-2009 through July-2010

13. DOE Adopting FFC Analysis