Ordering Paragraphs 51 and 54: Market Saturation Data

Ordering Paragraph 51 provides:

"For nonresidential programs, in the PY 2001 applications, the utilities shall gather and provide data regarding the extent of free-riders and market saturation by product and customer markets and market segments. The utilities shall convene a public process with interested stakeholders to determine how best to obtain and report the information."

Ordering Paragraph 54 provides:

"The utilities shall immediately, and jointly with interested stakeholders, conduct an investigation of saturation rates for T-8 lighting and other measures, by market and market segment. The utilities, together with interested stakeholders shall also develop protocols for determining when a measure has reach saturation so that the incentives should be phased out or eliminated. In the PY 2001 applications, the utilities shall report on the proposed saturation rates of specified measures, the proposed saturation protocols, and how they intend to incorporate such agreements and protocols in the program."

With respect to OP 51, the utilities provide market saturation data in Appendix C3. The parties agree to:

The proposed agreement appears reasonable for PY 2001 programs, with a few directions. The utilities indicate that the spreadsheet containing energy efficient measure saturation and penetration results is a "work-in-progress containing draft results." The utilities should continue to update the spreadsheet, including industrial customers and more segmentation, and should include an updated version as an Appendix to the PY 2001 Applications.

With respect to OP 54, the utilities recommend that we adopt their "Proposed Protocols for Decisions to Terminate Promotion of Energy Efficiency Measures," set forth in Appendix C4. The utilities contend that the incentive termination decision requires the exercise of judgment based on a number of market and program factors, and thus is not easily reduced to a numerical value or formula. The proposed protocols thus recommend consideration of the following factors:

The utilities also propose to evaluate and consider the continuation, phasing out, or elimination of incentive payments or other methods of promotion of specific measures as part of the annual program planning and review process. The parties, except for ORA, agree with the utilities' recommendations.

ORA objects generally to adopting protocols for the termination of incentives.

For PY 2001, the utilities should use the proposed protocols as a preliminary first step, with the further direction set forth below. We are unable to evaluate ORA's objections because ORA provides no explanation or rationale.

The proposed protocols, while a first step, may be too broad to be useful. We also question some of the supporting rationales, e.g., potential market regression, which seems antithetical to the purported goal of market transformation, and the use of rebates as a form of advertising.

We suggest that the proposed protocols be used in a slightly different manner. The proposed "factor" of "overall measure saturation and trends in market share" should be revised to institutionalize (preliminarily) the 50% saturation rate as a trigger for further analysis. The other "factors" are considerations that may be used to evaluate the desirability of reducing or eliminating incentives. An additional consideration should be the end-use programs' NTGR. Further, we believe that it is preferable to include upper limits restricting further incentive offerings. The parties should discuss appropriate upper limits.

For PY 2001 programs, it will be important for the utilities to fully explain and document decisions to continue incentives for measures that have saturation levels exceeding 50%. The utilities should perform an analysis of those measures that show a saturation over 50% in any customer segment or sub-class. The analysis results should be appended to the PY 2001 Applications. Further, the utilities should reference the measures' saturation rates in the program descriptions included in the PY 2001 Applications.

The utilities should perform the saturation analysis as new data is obtained and, for all measures, at least annually, which should be reflected in the applicable Quarterly Reports and the Annual Report. The utilities should update the saturation data in each quarterly report and the Annual Report.

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