PAYS: AN OPPORTUNITY FOR WORKING TOGETHER

1. PAYS:AN OPPORTUNITY FOR WORKING TOGETHER A presentation for Creating Energy-Air Quality Collaboratives in the Northeast and MidAtlantic States Westbrook, CT October 22, 2002 Nancy Brockway, Commissioner New Hampshire Public Utilities Commission

2. Enormous untapped potential... • 15-16% of total electrical consumption by 2010 [1997 - Five Labs Study] • 64K mW displaceable in a decade [ACEEE 2000] • Lighting = 25% peak commercial demand -- lighting energy needs could be cut 30 - 50% [Environmental Media Services 2000] • Over 30 % of present electricity needs could be replaced by efficiency. [VEIC report, summer 2002]

3. Huge savings are left on the table... • The same market barriers persist: • lack of customer information/trust • hassle factors • first-cost factor/lack of access to capital • split incentives • tragedy of commons • volatility vs. “price signals”

4. Public/Utility Funding Has Its Limits • Total utility DSM $ down 45% since 1993 • $750M foregone = 53K more tons SO2, 26K more tons NOx • CA DSM down 50% since 1994 • CA lost 1100 mW in potential demand savings • Crash program since blackouts - disruptive boom and bust • SBC Funds = +/- 25% of 1993 DSM • Explicit competition with other public goods • Exposed to political pressure on rates

5. Old DSM Programs Have Limited Scope • Greater subsidy = greater impact? Yes, but • Message = “no value” proposition • “You wouldn’t want this if you had to pay full freight” • “This only makes sense if your neighbor pays for it.” • Still requires: • Large up front payments • Hassle and capital spending • L/L investment in T’s benefit • Public/Utility funding has an iron ceiling...

6. The PAYS Alternative How it works... • Customer selects (qualifying) measure • Customer signs up for PAYS treatment of cost • Measure and installation fully funded upfront • Customer pays over time on DISCO bill • Measures are Certified to provide savings right away • Payment never more than savings • DNP for non-pay just like other DISCO charge • Portable measures • when customer leaves, take and pay balance • Permanent measures • when customer leaves, pay off or “run with meter”

7. PAYS:Unleashes Pent-up Demand for Efficiency • Value proposition: • Guaranteed you’ll save more than you pay. • Pay only if you save. • No need to shell out money up front. • Easy repayment terms on utility bill. • Duty to repay runs with benefit of savings. • Allows for larger, more permanent measures • “You’ve wanted to save - Now you can!”

8. PAYS: Breaks through iron $ ceiling • Low or no cross-subsidies • Revolving fund, in effect • Minimizes SBC burden on non-Participants • Investment limited only by demand • True market transformation: • VENDORS can run/promote/drive uptake • Investment driven by consumer self-interest

9. PAYS at work in New Hampshire • Two Pilot Programs in operation today • PSNH - - municipal customers • NHEC - - all customers, with focus on smaller customers • Utility runs program/arranges installation • Utility fronts costs, “owns” measures until paid off • NH PUC Orders ok DNP and “run with meter” • Order No. 23,751, 8/1/01; Order No. 23,751, 8/1/01 • Revolving fund and low overhead • started with 10% of overall SBC budget • Utility overheads low - about 11% so far (including start-up) • In tandem w/ CORE ENERGY EFFICIENCY programs

10. NH “Core Efficiency Programs” • NH Saves - Residential • Residential Lighting (Energy Star) • Energy Star Homes • Energy Star Appliances • Residential Retrofit (with low-income module) • NH Saves - C&I • C&I New Construction • Large C&I Retrofit • Small C&I Retrofit • Other Utility-specific programs • PSNH - RFP program • CVEC - torchiere turn-in

11. PSNH & Munis Opening Doors • “2/3 savings, 3/4 life” rule = conservative • @ 2Q 02: • 52 projects submitted, from 25+ municipalities • 36 qualified to date ($427K); 8 not meet savings criteria, 2 pending • Mostly lighting so far • Est. lifetime savings about 12,440,000 kWh • Est. lifetime dollar savings about $1,550,000 • “We could not have done it without PAYS.” • Not a loan, but a utility bill • not require voter approval if have regulatory out. • voter approval impossible despite robust savings

12. NHEC - a service for members • “Why pay now when you can pay as you save?” • Differences from PSNH pilot: • Fuel neutral - not just electric savings • May average measure savings to qualify project package • Bill stuffer with June bills: • 52K customers, 358 positive responses. • Target customers with audits but no action • 1st PAYS multi-metered apartment project • PAYS Point of Purchase lighting promotion.

13. PAYS Lessons So Far • PAYS is working largely as expected. • Vendors can be interested in offering. • Utilities can handle bill payment issues. • PAYS does overcome barriers. • Customers with audits who can’t/don’t take action • Government agencies who have financing issues • Potential to overcome split incentives • Required payback does not “scare off” customers. • Pilot experience surfacing issues. • Running program by IOUs can add issues. • “It’s not a mortgage, not a loan, it’s a PAYS product!”

14. Shall we collaborate? • What is our goal for efficiency advocacy? • More ratepayer dollars in SBC? • More utility dollars for efficiency? • More government dollars in program? • OR: • More efficiency in energy use, and • More consumer participation, and • Greater market for efficiency applications.

15. PAYS:A Value Proposition for Efficiency • “It’s not just the subsidy, stupid!” • “Try PAYS. You just might like it!” • Unlikely allies are likely: • Government budget overseers • Business community • Vendors • Consumers who want control AND efficiency • Trees, birds, lungs, energy bill payers, people whose land is desired for transmission lines and generators, etc. • So, let’s talk!