Best Practices in Energy Efficiency Program Screening - Synapse ...

These include: fully accounting for other program impacts (OPIs) 1 where appropriate;
properly estimating avoided costs; using the most appropriate discount rate; capturing
spillover effects; fully accounting for the risk benefits of energy efficiency; and more. All
of the best practices we recommend are being applied today in at least one state, and
sometimes in many states. However, there are few states, if any, that apply all of the
best practices recommended here. In the final section of this Executive Summary we
discuss the key issues to consider in deciding which test to use in screening energy
efficiency programs.
We note at the outset that one of the chief considerations in screening energy efficiency
programs is to ensure that the programs will reduce energy costs to customers. Energy
efficiency offers a variety of benefits to customers and to society as a whole, some of
which have important public policy implications. However, in screening energy efficiency
resources it is critical to acknowledge that for many key stakeholders – e.g., legislators,
regulators, and consumer advocates – the benefit of reducing energy costs and reducing
customers’ bills is paramount.
Treatment of Other Program Impacts
Other program impacts are those costs and benefits that are not part of the cost, or the
avoided cost, of energy. OPIs fall into three categories:
Utility-perspective OPIs include, for example, reduced customer arrearages and
reduced bad debt write-offs.
Participant-perspective OPIs include, for example, improved health, increased
safety, other fuel savings, reduced maintenance costs, and increased comfort.
Many of these participant-perspective OPIs are especially significant for lowincome
customers.
Societal-perspective OPIs include, for example, reduced environmental impacts
and reduced costs of providing health care.
These OPIs should be included in cost-effectiveness tests for
which the relevant costs and benefits are applicable. The
primary rationale for including OPIs is to ensure that the tests
are internally consistent. This is especially important in the
application of the TRC test. By definition, this test includes
the participant cost of the energy efficiency measures, which
can be quite large in many cases. In order for the TRC test to
be internally consistent, it must also include the participant
benefits from the energy efficiency measures, including OPIs.
Excluding the participant-perspective OPIs from the TRC test
results in cost-effectiveness outcomes that are skewed
| 2 Best Practices in Energy Efficiency Program Screening | www.nhpci.org
The primary rationale for
including other program
impacts is to ensure that the
tests are internally consistent.
Since the TRC test includes
the program participants’
costs, it must also include the
program participants’
benefits.
against energy efficiency, under-investment in energy efficiency programs, and higher
costs for utility customers on average.
1 We use the term “other program impacts” to describe what are commonly referred to as non-energy
impacts (NEIs) or non-energy benefits (NEBs). OPIs are those costs and benefits that are not part of the
costs, or the avoided cost, of the energy provided by the utility that funds the efficiency program. In
addition to non-energy impacts, OPIs also include “other fuel savings,” which are the savings of fuels
that are not provided by the utility that funds the efficiency program.