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Process Evaluation of the ConAug Program (6/05)
JUNE 2005
PREPARED BY RESEARCH/INTO/ACTION
PORTLAND, OREGON
EXECUTIVE SUMMARY
The Bonneville Power Administration (Bonneville/BPA) is a federal agency that
transmits and markets the electricity generated by dams on the Federal
Columbia River Power System. Bonneville has contractual relationships with
over 100 public utilities in the Pacific Northwest, all of whom rely on Bonneville
to provide some portion of the power they require. Bonneville encourages its
customer utilities to support energy efficiency projects in their service
territories by providing funding mechanisms for those utilities to offer
incentives for projects that save energy. One of these mechanisms is the
Conservation Augmentation Program (ConAug), through which utilities enter
into bilateral contracts with Bonneville to provide conservation resources.
Since September 2004, Bonneville has been engaged in a collaborative
conservation planning process to solicit recommendations for the post-2006
conservation program structure (covering the 2007-2009 rate period). In late
April 2005, Bonneville contracted with Research Into Action, Inc. and Energy
Market Innovations, Inc. to conduct an evaluation of the ConAug program. This
evaluation focused on customer utility response to the program and a review of
best practices for similar programs. The focus of the evaluation was to identify
the perceived strengths and attractive features of the program and to clarify the
perceived barriers and what solutions are adequate to address them.
The research was conducted in May and early June 2005, and included:
interviews with seven program staff; an email survey of 41 stakeholders,
including customer utilities, Bonneville staff and third-party implementers; and
in-depth interviews with a sample of 17 customer utilities identified through
the email survey.
The evaluation identified strengths and barriers for the program, as well as a
series of recommendations that could improve customer response to the
program.
FINDINGS
PROGRAM STRENGTHS
From the perspective of the customer utilities, there are several strengths of the
program:
- ConAug has had relatively stable funding for close to five years.
- Bonneville energy efficiency representatives and engineers received high praise from the utility contacts.
- Participants have used ConAug funds to keep their energy efficiency programs running during the tumultuous 2000-2005 period.
- ConAug and its predecessor the Invitation to Reduce Load through Conservation (IRLC) contain a path for creative and custom projects that works regardless of utility territory characteristics.
- Utilities see that Bonneville has tried in its own way to be responsive to their needs.
- The M& V requirements ensure credible savings.
- The tools are useful.
There are also strengths of the program from Bonneville program staff”s perspective:
- Bonneville’s oversight activities do appear to help the agency avoid instances of gaming and fraud, and allow for clarification of the rules in a way that has not been burdensome to participating utilities.
- Bonneville has been able to make modifications to the program design based on experience.
- The program is viewed as highly cost-effective.
PROGRAM BARRIERS
The primary barrier to participation in the ConAug program is the decrement
requirement for some utilities. All other issues within the program are really
secondary in importance relative to this one, which only affects the non-loadExecutive
following, decrement-eligible utilities. Within the decrement issue, there are
three important elements including:
- Decrement Definition and Implementation Guidelines – Among
both participants and nonparticipants, there is considerable
uncertainty regarding how the decrement is defined and actually
works. There is not, at present, a single cogent explanation of the
decrement policy that has been made available to the market.
- Legitimate Concerns about Fairness – To customer utilities, it
appears that Bonneville gets most of the potential benefit resulting
from ConAug, purchasing conservation for 12¢-16¢ and selling it on
the market for whatever the market will pay, possibly in excess of its
purchased price. The measure life for which Bonneville is willing to
pay is 10 years. Utility contacts note that this affects longer-lived
measures by discounting long-term savings. This is particularly an
issue in residential measures.
- Long Term Repercussions from the Decrement – These concerns
reflect two things: first a lack of certainty as to what Bonneville means
in statements about how they will take the decrement and treat it in
the future, and, second, a lack of trust that Bonneville will permit
utilities, in future PSAs, to purchase power equal to or in excess of
historical purchases once they take a decrement.
In addition to concerns about the decrement, there are a few other barriers. In
particular there are some concerns about M&V, project documentation
requirements, freeridership and the amount of the incentive. These concerns
were more obvious in responses to the e-mail survey rather than the in-depth
interviews and affect nonparticipants more than participants. The in-depth
interviews revealed that there is general acceptance of these requirements;
however some modifications would be welcome.
ConAug has consistently been perceived as more top-down than collaborative.
There are, based on the benchmarking research, a variety of opportunities to
further simplify or streamline ConAug which could improve perceptions of the
program:
- Other programs have developed ways to reduce M&V through sampling for more simple measures.
- Other programs use M&V to determine payment, advancing a portion of the incentive at different stages and reserving 25-33% for a final payment after M&V.
- Other programs modify program requirements for each application period and define the "rules" for a set period of time, allowing for the program to be more responsive to market conditions.
- Other programs have found it is very important to clearly detail the rules and procedures so that all parties know exactly what is expected of them.
RECOMMENDATIONS
The evaluation confirms that there is value for the utilities to have a bilateral
contract with stable funding in order to acquire conservation for the region. It
also appears that Bonneville needs a program that is more flexible than
ConAug, with paths that allow for different utilities to sell Bonneville
conservation in the manner that works best for their market.
Recommendation 1: Determine Whether a Bilateral Contract Program Should be Attractive to All Customer Utilities
The decrement is the major problem from the perspective of non-load-following
utilities and from many of the staff working with these utilities. There appear to
be legitimate issues with the decrement because it shifts the benefits to
Bonneville without compensation to decremented utilities. Yet Bonneville is
reasonable in concerns about utilities getting the benefits if there is no
decrement. Bonneville has expressed the view that the decrement will be
included in future bilateral contracts.
If Bonneville wishes to have increased participation by non load-following
utilities, there are two primary choices:
Or:
- Keep the decrement, but find a way to ensure that the utilities and Bonneville share the risk and rewards more equitably.
If Bonneville does not wish to increase participation by non-load-following
utilities, the decrement can be maintained. However, it will be important to
clarify exactly what the decrement means through an improved communication
strategy.
Recommendation 2: Develop a Communication Strategy
This recommendation is also important for the program as a whole, irrespective
of the decrement. Bonneville should have a well-thought-out communication
strategy and should systematically test the program components and the
communication materials (e.g., utilizing focus groups, in-person meetings)
among the utilities.
Recommendation 3: Consider Developing Program Paths for Different Utility Types
At present, the program structure is focused on customer segment offerings
(i.e., residential, commercial). There may be merit to considering tailoring the
program offerings more along the lines of the types of utilities that will be
offering the programs. A package of ConAug programs might include the
following:
- Large Non-Load-Following Utility Package – This package would be
very customized, designed specifically to reflect the infrastructure that
exists at these utilities.
- Small Load-Following Utility Package – This package would include
standard offer components with deemed savings, plus a custom
element that would include the provision of as-needed technical
resources to these utilities.
- Small Non-Load-Following Utility Package – This package be just
like that for load-following utilities but would also include a
decrement modeling component that would assist these utilities in
understanding the impacts that their system would experience on a
project-by-project basis.
Recommendation 4: Consider Revisions to Incentive Levels.
Consistency is important to the utilities in marketing the program and
developing projects. Several utilities also made the argument that longer
measure lives should be valued appropriately, and this is worthy of
consideration by Bonneville as it establishes incentive levels.
Recommendation 5: Consider Refinements to Process and Protocols.
There is a variety of smaller refinements to the processes or protocols of the
program that should be considered in a future program using bilateral
contracts:
- Within the custom and standard options, where energy savings
estimates are made or approved by Bonneville engineers, there should
be a recognition of shared responsibility for M&V findings.
- There should be clear protocols for Bonneville and its agents
regarding involvement of local utility representatives in marketing and
project development work with end-use customers.
- Contacts emphasized the need for flexibility around free-ridership, –
recognizing there may be projects that fall within these criteria that
truly will not happen otherwise.
Recommendation 6: Empower ConAug Program Staff to Make Final Decisions
Conservation engineers and EERs need to be empowered to make decisions
when they represent the program to utilities, so that utility staff will have more
confidence about what Bonneville will accept and thus will have confidence
about what they can offer their end-use customers.
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