1. August 6, 2008CLF / VPIRG 1 Energy Efficiency Budget Justification for Significant Increase in Energy Efficiency Utility Budget

2. August 6, 2008CLF / VPIRG 2 Recommendations Current Spending – $30.75 million / year Increase to $52.5 million in 2009 Transition to $85 million / year by 2011

3. August 6, 2008CLF / VPIRG 3 Vermont Law Budget Must Capture All Reasonably Available Cost Effective Efficiency Savings as Rapidly as Possible Statutory Standards 30 V.S.A. § 209 As circumstances and programs evolve, the amount of the charge shall be reviewed for unrealized energy efficiency potential and shall be adjusted as necessary in order to realize all reasonably available, cost-effective energy efficiency savings. 209(d)(4) Provide for delivery of these programs as rapidly as possible, taking into consideration the need for these services, and cost-effective delivery mechanisms. 209(e)(9).

4. August 6, 2008CLF / VPIRG 4 Need for Increased Energy Efficiency Investment Statutory Standards Ensure that the energy efficiency programs implemented under this section are designed to make continuous and proportional progress toward attaining the overall state building efficiency goals established by 10 V.S.A. s. 581, by promoting all forms of energy end-use efficiency and comprehensive sustainable building design. 209(e)(15). PSB Decisions Docket #5270 (1990) (potential of efficiency) Docket #5980 (1999) (Energy Efficiency Charge) Docket #6777 (2002) (Value of efficiency measures) Docket #6860 (2005) (Efficiency in transmission expansion) Docket #7081 (2007) (Efficiency in transmission planning)

5. August 6, 2008CLF / VPIRG 5 Need for Increased Energy Efficiency Investment 2006 EEU Budget Order Recognized higher budget level justified It would have been reasonable to increase the budget further (EEU Budget Order at 39) Concern regarding short term rate impacts Recent Vermont Energy Legislation

6. August 6, 2008CLF / VPIRG 6 DPS Avoided Cost Study Supports Increased Budget All energy efficiency resources that cost less than the avoided cost should be acquired. (EEU Budget Order at 18) 2007 Cost of Energy Efficiency: 2.6 cents/kWh saved DPS Avoided Costs: 5.8 cents/kWh to 8.9 cents/kWh Avoided costs of comparable electric supply as reported by Efficiency Vermont: 10.7 cents/kWh

7. August 6, 2008CLF / VPIRG 7 Rising Energy Costs Justify Increase in Efficiency Budget Rapidly rising fuel costs affect wholesale energy costs Price of oil has nearly doubled since 2006 when previous budget was approved Between 2006 and 2007, wholesale price of electricity in New England increased 20% from 6.8 to 8.2 cents/kWh

8. August 6, 2008CLF / VPIRG 8 Rising Electric Supply Costs

9. August 6, 2008CLF / VPIRG 9 Volatility of Electric Costs Support Increase in Efficiency Budget Expiration of contract with Hydro Quebec Uncertain extension of Vermont Yankee license Reliability problems Concerns about decommissioning funds, radiation levels and corporate restructuring Volatility would be mitigated by proposed efficiency budget Recommended budget of $85.5 million would supply equivalent to 6% of Vermonts annual power at less than half the avoided cost of supply

10. August 6, 2008CLF / VPIRG 10 Increased Avoided Costs Winter PeakWinter Off Peak Summer Peak Summer Off Peak AESC 20050.0640.0520.0610.045 Change from 05-07 0.0320.0180.0400.025 Percent Change 49%34%65%55%

11. August 6, 2008CLF / VPIRG 11 Energy Efficiency Costs Have Been Decreasing Year200520062007 Avg. cost/kWh0.0350.0370.026

12. August 6, 2008CLF / VPIRG 12 Energy Efficiency Costs Have Been Decreasing

13. August 6, 2008CLF / VPIRG 13 More Efficiency Resources Available Higher reductions may be achieved in targeted areas Increased investments in targeted areas are providing additional efficiency savings and still costing below avoided costs Majority of state untapped New opportunities & technologies

14. August 6, 2008CLF / VPIRG 14 Change in Federal Efficiency Standards A significant portion of efficiency savings in 2007 came from CFLs New standards not in place until 2012 New technologies available and costs declining Many remaining efficiency measures still below avoided costs Even if CFLs were replaced with measures that cost 4 times more, they would still be cost effective

15. August 6, 2008CLF / VPIRG 15 Environmental Benefits Environmental Need 2007 efficiency investments produced a 661,500 ton reduction in carbon dioxide, 562 tons in nitrogen oxides, and 1,103 tons in sulphur dioxides that would have otherwise been emitted by conventional electric generation. These also resulted in a savings of 4.7 million gallons of propane, 242 million gallons of natural gas, 3 million gallons of oil and 283 million gallons of water. PSB decisions have placed an economic value on environmental externalities of about 5% (Docket #5270 (1990) and $7.86 MWh for natural gas (Docket #6290 (2003).

16. August 6, 2008CLF / VPIRG 16 Scale of Investment Higher level of investment is justified $52.5 million investment supported by previous recommendation. $85 million investment provides ramp up similar to past experience Investments made earlier will have greatest benefit as power contracts expire. Expanded scope of EEU services creates new opportunities

17. August 6, 2008CLF / VPIRG 17 Conclusion All cost effective investments are required, reasonable and prudent Efficiency resources continue to provide savings at 1/3 to 1/2 the cost of supply resources EEU Budget should be set at $52.5 million for 2009 and transition to $85 million for 2011