1. Cost Effectiveness Background for the Energy Savings Assistance Program ESAP Workshop 3 October 20, 2011 SDG&E / SoCalGas

2. Overview Regulatory background The CE tests currently used for the ESA Program The models used to run the tests Non-energy benefits The inputs required How the results are used 2

3. LIEE Cost Effectiveness Background 2000: In response to D.00-09-036, a technical subcommittee is formed to develop a cost effectiveness test which would include non-energy benefits. 2001: In response to D.01-03-028, the Low Income Public Purpose Test (LIPPT) model is developed by TekMRKT Works, Skumatz Economic Research, Inc. and Megdal Associates. 2002: In response to D.01-12-020, the LIPPT is modified to evaluate the LIEE program and individual measures. 2003: In response to D.02-08-034, IOUs use the modified model to test their programs 3

4. LIEE Cost Effectiveness Background 2004: ACR directed the IOUs to institute a process for considering measures for the PY2006 program. 2005: proposals for new measures are solicited and assessed using the cost effectiveness criteria approved by the Commission. 2008: In D.08-11-031, the Commission established new cost effectiveness criteria for determining which measures could be in the program 4

5. The Cost Effectiveness Tests Currently the IOUs report 3 tests:  The modified participant test (MPT)  The utility cost test (UCT)  The total resource cost test (TRC) Only the MPT and UCT are used to determine which measures are included in the program Only the MPT and UCT include non-energy benefits (NEBs) 5

6. The Models A modified version of the LIPPT model (developed in 2001) is used to estimate the NEBs  The model was developed in 2001  The model allows input of basic assumptions regarding the NEBs  NEBs are estimated on a per household basis and then allocated across measures based on their share of energy savings The E3 Calculator for Energy Efficiency is used to estimate the avoided costs for the UTC and the TRC 6

7. NEBs Included in the Tests Participant : Water/sewer savings Fewer shutoffs Fewer calls to utility Fewer reconnects Property Value benefits Fewer fires Moving costs / mobility Fewer illnesses and lost days from work/school Net benefits for comfort & noise Net benefits for additional hardship 7 Utility: Reduced arrearage cost Reduced bad debt written off Fewer shutoffs Fewer reconnects Fewer notices Fewer customer calls Fewer emergency gas svc calls CARE subsidy avoided

8. NEB Study A study was conducted in 2010 to look at the status of NEBs, research what other states are using, and report the value range  The report provided information on NEBs reported in other states/programs including a table of reported values  NEBs are very difficult to quantify and no precise methods are being used.  Many of the other values reported are a % of energy savings  Any additional studies and customer surveys would cost much more than originally budgeted 8

9. The report is on the LIOB website: http://www.liob.org Look under “Reports” May12, 2010 Non-Energy Benefits: Status, Findings, Next Steps, and Implications for Low Income Program Analyses in California Skumatz Economic Research Assoc and The Cadmus Group

10. How the CE Results are Used Currently the IOUs report the test results for the portfolio and for each measure by fuel type, housing type and climate zone (Tables A-5, A-6, A-7) Continuing program measures are required to have a result of 0.25 for either the MPT or UCT New measures are required to have a result of 0.25 for both the MPT and UCT In cases where the measure does not pass but does provide health or safety benefits, measures may be kept regardless of the test result (example: furnaces and hot water heaters) 10