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Portland Energy Conservation, Inc. (PECA) was selected by the Bonneville Power Administration (BPA) to conduct process and impact evaluations of the Efficient Water Heater Program (EWHP) and to investigate fuel-choice issues related to the program. The impact evaluation quantitatively estimates the amount of energy saved by the EWHP. The process evaluation quantitatively measures the success of program delivery mechanisms, marketing, data collection, administrative reporting, barriers to participation, customer satisfaction, and program participation.

Five sources of data were used: utility records, BPA records, participant surveys, confidential interviews with utility and BPA staff, and gas-utility records.

Cost Effectiveness
: From the participant's view, using a simple payback approach, an efficient water heater with a 9-year warranty yields a 3.2 year payback. A 5-year warranty water heater resulted in an (instant) payback of -3.1 years.

Total savings to BPA are 3,277 MWh annually. These savings were obtained at a nominal levelized cost of 54.5 mills/kWh and at a real levelized cost of 43.2 mills/kWh. Program levelized cost could be reduced to approximately 32 mills by lowering the rebate to $30, lowering utility administration costs by 30%, and by increasing the average penetration rate by 1.5 times to 18%. Bonneville should determine how much the rebate could be lowered while increasing penetration rate and decreasing utility staffing costs.

Energy Savings: The average value of savings for participants was 227 kWh per water heater per year. This value includes free-rider effects, estimated to be between 9% and 17%. The fuel-switching effects amounted to 26 kWh per water heater. The resulting net average program savings for each water heater are 201 kWh per year, somewhat less than the regional estimate of 250 kWh.

Demographics and Characteristics: Participants live almost exclusively in single-family ???dwellings. Of the 1400 mail survey participants 52% use electric space heat, close to BPA's regional estimate of 54%. The average pre-rebate cost per water heater was $235.

Participation Rates: During the 15-month analysis period, 16,304 customers from 62 out of 119 participating utilities took part in EWHP. The remaining 57 utilities did not respond to our request for data.

Penetration Rates: Utility penetration rates varied from 0 to 0.90 for the analysis period. Reporting utilities together achieved a 0.123 penetration rate.

Program Costs: The average cost to the participant, after the water heater rebate, was $4. Individually this ranged from a negative $60 to a positive $60 expense. During the 15-months the BPA central and area offices incurred a total cost of $1,283,796, or $78.74 per participant.

The 26 program representatives interviewed believe that EWHP is a success. It is easy to deliver and utilities feel a sense of direct participation in this simple, straightforward conservation program.

Customer Satisfaction: Customer satisfaction with EWHP is very high, because BPA and the utilities emphasize program simplicity and prompt payment of rebates.

Fuel Choice: Participant survey results indicate that the rebate does not influence customers to choose electric over gas water heaters.

Delivery Mechanisms: Because most of the utilities choose to run their program under Option 2, which gives utilities responsibility for EWHP, BPA should analyze the cost effectiveness of the clearinghouse and its comparative benefit to utilities to determine whether the clearinghouse should continue as designed.

Administrative Reporting: The use of interactive software could decrease utility paperwork and FTE devoted to EWHP. Utilities could enter data once and disseminate it to their own hard records as well as on-line to the Area Office and Headquarters.

Financial Issues: Most utilities feel that the administrative payments for Option 2 do not adequately cover their program expenses. BPA should remind utilities that this is a payment to offset costs of a program they selected. In addition, some program managers expressed desire for unused advertising funds to become available to other utilities. Bonneville could create a pool of unused funds for use by very active utilities, or award additional advertising funds based on merit.

Marketing Issues: Utilities are concerned that BPA may not continue EWHP long enough to change market baseline and influence DOE appliance standard rule making. Bonneville could assure utilities that funding would continue, if this is so, until the service areas have reached targeted saturation levels. PECI also recommends that BPA explore successful program marketing techniques and share them with utilities via a newsletter or other forum.

Barriers to Participation: Two barriers to participation were identified by utilities: a shortage of program-eligible water heaters and the need to market the EWHP to plumbers. BPA should encourage utilities to contact retailers and distributors in their service areas and verify that adequate stock is available. If a shortage of efficient water heaters exists, utilities should identify what is needed to increase the supply.

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