Cost-effectiveness

In this section, we outline the basic definitions associated with cost-effectiveness. See Chapter 4 of this manual for a more detailed description of the Commission's requirements for cost-effectiveness of program proposals.

Cost-Effectiveness: An indicator of the relative performance or economic attractiveness of any energy efficiency investment or practice when compared to the costs of energy produced and delivered in the absence of such an investment. In the energy efficiency field, the present value of the estimated benefits produced by an energy efficiency program as compared to the estimated total program's costs, from the perspective of either society as a whole or of individual customers, to determine if the proposed investment or measure is desirable from a variety of perspectives, e.g., whether the estimated benefits exceed the estimated costs. See Total Resource Cost Test - Societal Version and Participant Cost Test (below).

Participant Test: A cost-effectiveness test intended to measure the cost-effectiveness of energy efficiency programs from the perspective of electric and/or gas customers (individuals or organizations) participating in them.

Peak Demand Period: Noon to 7 p.m. Monday through Friday, June, July, August, and September.

Total Resource Cost Test - Societal Version. A cost-effectiveness test intended to measure the overall cost-effectiveness of energy efficiency programs from a societal perspective, rather than merely from the perspective of a set of individual actors.