1. Direct Use of Natural Gas Status of Analysis Staff Analysis Today’s Agenda: Review of Major Analytical Input Assumptions Present Preliminary Results (Not Findings!) March 18, 2011

2. Today’s Results = Status Report, Not Final Answer We Aren’t Testing Every Option We Aren’t Testing Every Option We Haven’t Tested Alternative Input Assumptions We Haven’t Tested Alternative Input Assumptions We Haven’t Adjusted the Conservation Resource Potential for the impact of conversions to or from electricity to natural gas We Haven’t Adjusted the Conservation Resource Potential for the impact of conversions to or from electricity to natural gas

3. We Aren’t Testing Every Option Some conversion options are excluded Some conversion options are excluded –Electric zonal to Electric FAF »Reason: Conversion cost more and uses more –Electric or Gas FAF to Ductless Heat Pumps »Reason: Assuming consumer preference is to use existing central system –Conversion to “dual fuel” systems (i.e., heat pump with gas furnace) »Reason: While this is the “optimal” solution if “cross-over” temperature between heat pump and gas furnace is determined by current relative fuel prices, the technology is not available to implement this option (Smart Grid (or Google, Apple?) may enable this )

4. We Will Test Additional Scenarios The “benefits/value” of providing air conditioning when converting to a heat pump are set to $0. The “benefits/value” of providing air conditioning when converting to a heat pump are set to $0. Energy use and cost are based on “market” quality installation, not utility/ETO program requirements Energy use and cost are based on “market” quality installation, not utility/ETO program requirements –Duct systems are not assumed to be sealed at time of installation –No heat pump controls/commissioning is assumed –Name plate furnace & heat pump efficiencies are set at federal minimums With your guidance/input we intend to test alternative assumptions With your guidance/input we intend to test alternative assumptions

5. Conservation Measures Affected by Conversions

6. HVAC and DHW System Conversion Cost and Energy Use Assumptions

7. Space Conditioning Estimates Source: SEEM calibrated simulation results from weatherization and heat pump conversion/upgrade analysis Source: SEEM calibrated simulation results from weatherization and heat pump conversion/upgrade analysis Gas consumption assumes identical model input assumptions as electric forced air, adjusted for furnace conversion efficiency (AFUE 90%) Gas consumption assumes identical model input assumptions as electric forced air, adjusted for furnace conversion efficiency (AFUE 90%) Climate = PNW Weighted Average Climate = PNW Weighted Average –Should we do each heating zone analysis after initial results are reviewed?

8. Water Heating Use Estimates Source: DOE Water Heater Standard’s Rulemaking Life Cycle Cost and Payback Period Analytical Spreadsheets (http://www1.eere.energy.gov/buildings/appliance_standards/residential/water_pool_heaters_nopr_tools.html) Source: DOE Water Heater Standard’s Rulemaking Life Cycle Cost and Payback Period Analytical Spreadsheets (http://www1.eere.energy.gov/buildings/appliance_standards/residential/water_pool_heaters_nopr_tools.html) PNW average daily hot water assumptions used in lieu of DOE test procedure values: PNW average daily hot water assumptions used in lieu of DOE test procedure values: –< 55 gal tanks: 56 gal/day for SF & 38 gal/day MF –>55 gal tanks 64.4 gal/day for SF Gas system use assumes same input assumptions as electric resistance Gas system use assumes same input assumptions as electric resistance

9. Home Sized Revised to Reflect Correlation with System Types and Basements* Dwelling Type System Type System TypeBasement(sq.ft.) No Basement (sq.ft.) MultifamilyElectric Zonal N/A1050 Multifamily Gas or Electric FAF & Heat PumpsN/A1450 Single FamilyElectric Zonal19001500 Single Family Gas or Electric FAF & Heat Pumps22501900 *Source: PNRES92

10. Base Case Energy Use Assumptions – Space Heating Home Characteristic System Type Dwelling TypeBasement House Size (sq.ft.) Ductless HP* (kWh/yr) Electric FAF w(kWh/yr) Zonal Electric (kWh/yr) Heat Pump (kWh/yr) Gas FAF (MMbtu/yr) MFNo1050 1,774 3,042 2,943 1,774 11.28 MFNo1450 3,551 6,477 5,919 4,471 24.03 SFNo1500 4,252 8,120 7,086 5,286 30.12 SFNo1900 5,814 11,182 9,690 6,874 41.48 SFYes1900 5,039 9,297 8,399 5,741 34.49 SFYes2250 5,692 10,245 9,486 6,094 38.01 * Ductless Heat Pump Use Assumed to be 60% of Zonal Electric. This Assumption Results In Lower Use Than Air Source Heat Pump w/o Duct Sealing & System Commissioning.

11. Base Case Energy Use Assumptions – Space Cooling Home Characteristic System Type Dwelling TypeBasement House Size ( sq.ft.) Ductless HP* (kWh/yr) Electric FAF w/CAC (kWh/yr) Zonal Electric w/CAC (kWh/yr) Heat Pump (kWh/yr) Gas FAF w/CAC (kWh/yr) MFNo1050 377 415 MFNo1450 394 432 SFNo1500 429 470 SFNo1900 527 578 SFYes1900 416 456 SFYes2250 401 440 *Ductless Heat Pump Cooling Use is Lower Than Central AC or Air Source Heat Pump DHP’s are assumed to achieve SEER 14 vs SEER 13 for Central AC & Heat Pumps.

12. Space Conditioning System Cost (2009$) Home Characteristic System Type Dwelling TypeBasement House Size (sq.ft.) Ductless HP Electric FAF w/CAC Electric FAF Zonal Electric w/CAC Zonal Electric Heat Pump Gas FAF w/CACGas FAF MFNo 1050 $3,668$2,131$803$2,073$746$4,213$4,256$2,929 MFNo 1450 $3,668$2,131$855$2,357$1,030$4,292$4,256$2,929 SFNo 1500 $3,668$2,131$855$2,392$1,065$4,292$4,306$2,951 SFNo 1900 $4,584$2,319$900$2,676$1,349$4,621$4,505$2,990 SFYes 1900 $4,126$2,159$900$2,676$1,349$4,621$4,505$2,990 SFYes 2250 $4,584$2,318$938$2,925$1,598$5,237$4,505$2,990 Ductless Heat Pumps are assumed to have lower installed cost than air source heat pumps, independent (i.e., excluding ) of the cost of duct systems.

13. Space Conditioning O&M Cost (2009$) Home Characteristic System Type Dwelling TypeBasement House Size (sq.ft.) Ductless HP Gas & Electric FAF w/CAC Gas & Electric FAF Zonal Electric w/CAC Zonal ElectricHeat Pump MFNo1050$142$183$47$136$0$148 MFNo1450$142$183$47$136$0$148 SFNo1500$142$183$47$136$0$148 SFNo1900$142$183$47$136$0$148 SFYes1900$142$183$47$136$0$148 SFYes2250$142$183$47$136$0$148

14. Duct System Cost (2009$) Dwelling Type Basement House Size (sq.ft.) Duct System Cost MFNo1050$1,467 MFNo1450$2,025 SFNo1500$2,181 SFNo1900$2,962 SFYes1900$2,480 SFYes2250$2,721

15. Water Heating System Cost & Use Assumptions Dwelling Type Tank Size (gals) System Type Total Installed Cost (2009$) Annual Maintenance Cost (2009$) Annual Energy Use - Electricity (kWh) Annual Energy Use - Gas (MMbtu) SFX<=55Electric Resistance$751$4 3,355 - SFX<=55HPWH$1,589$9 1,594 - SFX<=55Gas Tank$1,178$12 - 17.3 SFX<=55Condensing Gas$1,861$15 116 9.2 SFX<=55Instant Gas$2,380$67 30 13.2 SFX>55HPWH$1,623$9 1,830 - SFX>55Condensing Gas$2,084$15 134 15.8 SFX>55Instant Gas$2,380$67 30 15.1 MFX<=55Electric Resistance$751$4 2,295 - MFX<=55Gas Tank$1,178$12 - 11.8 MFX<=55Instant Gas$2,380$67 28 9.0 MFX<=55Condensing Gas$1,861$15 116 9.2 MFX<=55HPWH$1,589$9 1,090 -

16. Base Case Water Heating Assumptions System Type Representative Model Total Installed Cost Annual Maintenance Cost Annual Energy Use - Electricity (kWh) Annual Energy Use - Gas (Mbtu) SF - Electric Storage <= 55 gal50 gal EF 0.95 – Electric Resistance $ 751 $ 4.01 3,355 SF - Electric Storage > 55 gal66 gal EF 2.00 - Heat Pump Water Heater $ 2,176 $ 8.89 1,594 SF - Gas Storage <= 55 gal40 gal EF 0.63 EF - Standing Pilot $ 1,178 $ 12.36 -17.69 SF - Gas Storage > 55 gal66 gal EF 0.77 EF – Condensing w/ power vent $ 3,178 $ 14.79 12813.69 SF - Gas Tankless Variable output EF 0.82 Electronic Ignition, Power Vent, Improved HX $ 2,380 $ 66.88 3013.16 MF - Electric Storage <= 55 gal40 gal EF 0.95 Electric Resistance $ 617 $ 4.01 2,277 MF - Gas Storage <= 55 gal 30 gal EF 0.63 EF - Standing Pilot $ 1,071 $ 14.79 - 12 MF - Gas Tankless Variable output 0.82 EF Electronic Ignition, Power Vent, Improved HX $ 2,380 $ 66.88 288.91

17. Next Steps Revise inputs per guidance provided today Revise inputs per guidance provided today Adjust conservation “supply curves” to reflect changes in electric/gas “units” due to conversions Adjust conservation “supply curves” to reflect changes in electric/gas “units” due to conversions Re-run RPM Re-run RPM Consider “customer perspective” (i.e., review economics of conversion from end users perspective using retail gas and electric rates Consider “customer perspective” (i.e., review economics of conversion from end users perspective using retail gas and electric rates