Established Cost-Effectiveness Inputs

Certain inputs to the cost-effectiveness tests identified in the SPM have already been established by the Commission. Parties should use these inputs presenting their cost-effectiveness analysis to the Commission in their program proposals. These established inputs, along with their sources, are given below. All of the values given below represent the best-available data at the time of adoption of this manual. The Commission will update these assumptions periodically.

Effective Useful Lives of Energy Efficiency Measures

Standard values for effective useful lives (EULs) or measures are the standard assumptions used to determine the life-cycle savings associated with certain common energy efficiency measures. The EUL is generally an estimate of the median number of years that the measures installed under a given program are still in place and operable.⁵ If a program proposal involves any of the measures listed below, the standard assumption should be used. If a proposed program involves a measure not listed below, the applicant should propose an appropriate assumption for the EUL, citing any relevant studies or other data sources. In order to minimize uncertainty, EULs will be limited to a maximum of 20 years, even if particular devices may be expected to survive longer.

Table 4.1. Effective Useful Lives of Energy Efficiency Measures

Measure	Lifetime	Measure	Lifetime
Lighting		HVAC
Ballast - Dimmable	16	Air Conditioners - High Efficiency	15
Ballast - Electronic	16	Boiler - High Efficiency	20
CF- Screw-in Replaceable Lamp (Modular)	8	Bypass/Delay Timer	15
Compact Fluorescent Hardware Fixture	16	Chiller - High Efficiency	20
Delamping/Fixture Modifications/Removal	16	Chiller - Variable Speed Drive	20
Exit Sign - CF Hardware Kid/LED/ Electro-Luminescent	16	Cooling Towers/Evaporative Condenser	15
Fluorescent Fixture - T8	16	Furnace - High Efficiency	20
Halogen Lamp	0.6	Glazing - High Shade Coefficient	20
HID Fixture	16	Heat Pump - Packaged	15
Occupancy Sensor	8	HVAC/Space Heating/ Efficiency (Gas)	15
Photocell	8	Insulation	20
T8 Fixtures - 17 Watt Lamp, 2ft or 32-watt Lamp, 4ft	16	Reflective Window Film/ Windows	10
Time Clock - Lighting	8	Set-Back Thermostat	11
Fixture: T8 Lamp & Electronic Ballast	16	Timeclock	10
High Efficiency Lighting	16	Heat Pump - Split System	15
High Output T5 Fixture	16	AC Packaged Terminal Units	15
Induction Lamps	2	Adjustable Speed Drive	15
Induction Fixture	16	Ground Source Heat Pump	15
Indoor or Outdoor System Modification	16	Heat Pump with Integrated Water Heating	15
Lighting Controls	16	Packaged HVAC Systems	15
Daylighting Controls	16	Water Cooled Chillers	20
Lighting Power Density	16	Insulation Package	20
Refrigeration		Energy Management System	15
Auto Closer for Cooler/Freezer	8	Reduce Internal Load	15
Door Gaskets	4	Evaporative Coolers	15
Floating Head Pressure	16	HVAC/Refrigeration - SPC	20
Heatless Door	16	Nonresidential Gas - AC	20
Humidistat Control for Anti-Sweat Heater	12	Hot Water
Insulation on Refrigeration Suction Line	11	Water Heater - Gas	15
Night Covers for Display Cases	5	Horizontal Clothes Washer	10

Table 4.1 (continued). Effective Useful Lives of Energy Efficiency Measures

Measure	Lifetime	Measure	Lifetime
PSC Evaporator Motor - Walk-in/Display	16	Efficient Dishwashing	5
Refrigeration Case Doors - Glass/Acrylic	12	Water Heater Controls	15
Refrigerator Case with Doors	16	Domestic Hot Water Boiler	20
Refrigerator Condensate Evaporator - Elec/Non Elec	8	Miscellaneous
Strip Curtains for Walk-Ins	4	Cooking Equipment	12
Ballast: Electronic, for display case	16	High Efficiency Engine	15
Defrost	16	Kiln/Oven/Furnace	20
FHP & EFF Conditioner	16	Thermal Night Curtains	5
High-efficiency Liquid Suction Heat Exchangers	16	Custom Measures - SPC	15
Night Shields on Refrigerator and Freezer Cases	16	Local Government Initiatives	11
Refrigerator: Evaporative Fan Controller	5	Extrusion Equipment	15
Supermarket Systems	14	Audits	3
		Plug Load Sensor	10
		Information	1
		High Efficiency Motors	15
		Variable Frequency Drives	15
		Process Overhaul	20
		Pump Test	15
		System Controls	15

Net-to-Gross Ratios

Net-to-gross ratios (NTGRs) are used to estimate free-ridership occurring in energy efficiency programs. Free riders are program participants who would have undertaken an activity, regardless of whether there was an energy efficiency program promoting that activity or not. An NTGR is a factor that represents the net program load impact divided by the gross program load impact. This factor is applied to gross program savings to determine the program's net impact.⁶ This factor is important in determining actual energy savings attributable to a particular program, as distinct from energy efficiency occurring naturally (in the absence of a program).

Applicants should refer to the SPM to determine the appropriate manner in which to use NTGRs in submitting program cost-effectiveness information.

Program proposals should use the applicable NTGRs listed below. If a program is not listed below, or if a proposed program design deviates substantially from past design of related programs, program proposals may utilize a default NTGR of 0.8 until such time as a new, more appropriate, value is determined in the course of program evaluation. All existing programs not listed below shall also use a default value of 0.8.

Table 4.2. Net-to-Gross Ratios

Program Area/Program	Net-to-Gross Ratio
Residential
Appliance early retirement and replacement	0.80
California Home Energy Efficiency Rating System (CHEERS)	0.72
Residential Audits	0.72
Refrigerator Recycling	0.80
Residential Contractor Program	0.89
Emerging Technologies	0.83
All other residential programs	0.80
Nonresidential
Advanced water heating systems	1.00
Agricultural and Dairy Incentives	0.75
Coin Laundry and Dry Cleaner Education	0.70
Commercial and agricultural information, tools, or design assistance services	0.83
Comprehensive Space Conditioning	1.00
Lodging Education	0.70
Express Efficiency (rebates)	0.96
Energy Management Services, including audits (for small and medium customers)	0.83
Food Services Equipment Retrofit	1.00
Industrial Information and Services	0.74
Large Standard Performance Contract	0.53
All other nonresidential programs	0.80
New Construction
Industrial and Agricultural Process	0.94
Industrial new construction incentives	0.62
Savings by Design	0.62
All other new construction programs	0.80

Discount Rate

In evaluating all energy efficiency program proposals, the Commission shall use a pre-established discount rate of 8.15%. This standard assumption, used as the default in recent years, may be updated in the future. The discount rate is used simply to translate potential benefits in future years into current year terms.

Avoided Costs

In order to estimate the value of the energy efficiency occurring as a result of program activities, parties will need to be able to estimate the "avoided cost" of the provision of that supply of energy. Avoided costs represent the value of the electricity or natural gas that, in the absence of a program, would need to be procured and delivered to an individual consumer. When an energy efficiency programs creates a reduction in demand for electricity or natural gas, costs are avoided from the perspective of the consumer, the utility, and society. The Commission will continue to use six sets of avoided cost streams, which should be used on a statewide basis to apply to all program proposals:

Electric

· Avoided generation costs

· Avoided transmission and distribution costs

· Environmental externalities

Gas

· Commodity procurement costs

· Transmission and distribution costs

· Environmental externalities

Not all of the above avoided cost streams are necessary for all cost-effectiveness tests described in the Standard Practices Manual. Refer to that manual for more details on how to use the avoided cost streams.

Table 4.3 gives the Commission's avoided cost assumptions. Sources of each stream of values are given below the table. These estimates will be updated in the coming year for use during the 2003 funding cycle. Any new avoided costs will be utilized on a prospective basis for future program planning, and not applied retroactively to evaluate existing programs that were developed based on an earlier set of avoided cost assumptions.

Table 4.3. Electric and Gas Avoided Costs

	Electric ($ per MWh)				Gas ($ per therm)
Year	Generation	Trans. & Dist.	Env. Ext.	Total Electric	Commodity	Trans. & Dist.	Env. Ext.	Total Gas
2002	$99.05	$5.25	$6.55	$110.85	$0.49	$0.03	$0.06	$0.58
2003	$56.71	$5.50	$6.80	$69.01	$0.37	$0.03	$0.06	$0.47
2004	$53.41	$5.74	$7.04	$66.19	$0.34	$0.03	$0.06	$0.43
2005	$54.51	$6.00	$7.20	$67.71	$0.35	$0.03	$0.06	$0.45
2006	$49.61	$6.20	$7.40	$63.21	$0.37	$0.03	$0.07	$0.47
2007	$51.55	$6.50	$7.60	$65.65	$0.39	$0.03	$0.07	$0.49
2008	$53.25	$6.75	$7.85	$67.85	$0.40	$0.04	$0.07	$0.51
2009	$55.10	$7.04	$8.14	$70.28	$0.42	$0.04	$0.07	$0.53
2010	$57.08	$7.34	$8.34	$72.76	$0.44	$0.04	$0.07	$0.55
2011	$58.96	$7.60	$8.60	$75.16	$0.38	$0.04	$0.08	$0.49
2012	$61.38	$7.94	$8.84	$78.16	$0.40	$0.04	$0.08	$0.51
2013	$63.99	$8.30	$9.10	$81.39	$0.42	$0.04	$0.08	$0.53
2014	$66.76	$8.60	$9.40	$84.76	$0.43	$0.04	$0.08	$0.56
2015	$69.76	$9.00	$9.70	$88.46	$0.45	$0.04	$0.09	$0.58
2016	$73.00	$9.34	$9.94	$92.28	$0.48	$0.04	$0.09	$0.61
2017	$76.49	$9.74	$10.24	$96.47	$0.50	$0.04	$0.09	$0.63
2018	$80.23	$10.14	$10.54	$100.91	$0.52	$0.05	$0.09	$0.66
2019	$84.28	$10.55	$10.81	$105.64	$0.54	$0.05	$0.10	$0.68
2020	$88.44	$10.59	$11.08	$110.11	$0.57	$0.05	$0.10	$0.71
2021	$92.87	$11.12	$11.36	$115.34	$0.59	$0.05	$0.10	$0.74

Data Sources

Electric

1. Avoided Costs of Generation. These values are based on an August 2000 California Energy Commission forecast of market clearing prices using the MULTISYM model. Values for certain years were updated based on direction given in an October 25, 2000 ALJ Ruling on PY2001 planning in A.99-09-049, subsequently adopted by the Commission in D.01-01-060. Modifications to the CEC forecast were as follows:

Table 4.4. Assumptions for Electric Generation Costs

Program Years	Basis
2002	Historical market clearing price data from the Power Exchange (October 1999 to September 2000)
2003-2010	CEC market clearing price forecast, plus 20%
2011-2020	CEC market clearing price forecast
2021	CEC market clearing price escalated by growth rate over previous five years

In addition, the values reflected in Table 4.3 incorporate an "on-peak" multiplier, as ordered in the ALJ ruling of October 25, 2000 to account for the system value of reduced load on reducing market clearing prices, pursuant to AB970, Section 7, Table B, Paragraph 8, and the September 14, 2000 and October 25, 2000 ALJ rulings in A.99-09-049. The on-peak multipliers are described in Table 4.5.

Table 4.5. On-Peak Multipliers

Program Years	Multiplier
2002	5.0X
2003-2005	2.0X
2006-2021	1.5X

2. Electric Transmission and Distribution Avoided Costs. The T&D avoided cost value-stream is calculated based upon a statewide average of weighted forecasts of avoided T&D costs across utility service territories. This forecast was based upon 1996 sales for each utility, and converted from $/kW to $/MWh by assuming a 0.6 load factor. These values were adopted by the Commission in Resolution E-3592.

3. Electric Environmental Externalities. These values were adopted by the Commission in Resolution E-3592.

4. Gas Avoided Commodity Costs. Gas procurement costs are based on the CEC's August 2000 base case price forecast for electric generation.

5. Gas Transmission and Distribution Avoided Costs. These values represent a weighted average of gas T&D costs in PG&E, SDG&E, and SoCalGas territories, as represented by each utility in their PY2000 annual reports.

6. Gas Environmental Externalities. These values were recommended by the CBEE and adopted by the Commission in Resolution E-3592.