HomeMy WebLinkAboutStaff Report 188-10TO:
ATTN:
FROM:
DATE:
SUBJECT:
HONORABLE CITY COUNCIL
FINANCE COMMITTEE
CITY MANAGER
APRIL 6, 2010
DEPARTMENT: UTILITIES
CMR: 188:10
Utilities Advisory Commission Recommendation that the City Council
Approve the 2010 Ten -Year Electric Energy Efficiency Plan
RECOMMENDATION
Staff recommends that the Finance Committee recommend that the City Council Approve the
2010 Ten -Year Electric Energy Efficiency (EE) Plan for the period 2011 to 2020.
EXECUTIVE SUMMARY
This report presents the updated energy efficiency goals for the next ten years and the plan to
achieve those goals. Energy efficiency is the most cost-effective way to provide electric services
to customers as a kilowatt-hour not used is a kilowatt-hour that didn't need to be generated,
transmitted and delivered. Energy efficiency reduces greenhouse gas emissions, a key goal in
the City's Climate Protection Plan. Energy efficiency is also an important way for citizens and
businesses in Palo Alto to control their utility costs.
The proposed 2010 10 -year Energy Efficiency (EE) Plan has a goal to save 7.2% of the electric
needs of the City by 2020. This is a doubling of the goal in the 10 -year EE plan approved by
Council three years ago, in 2007. To achieve these more aggressive targets, additional funding
will be required. However, even with increased funding, these efficiency resources are less
costly than purchasing electric supplies, especially renewable supplies. Some of the additional
funding is planned to increase staff resources by one or two program managers to implement the
expanded programs that will be required to meet the goals. The new programs will include
programs administered and implemented in-house as well as those administered by third party
contractors.
The Utilities Advisory Conunission (UAC) reviewed the proposed 2010 Ten -Year EE Plan at its
meetings on February 9 and March 9, 2010 and voted unanimously to recommend that the City
Council approve the Plan.
BACKGROUND
City Policies and Applicable Legislation
Council approved the Long Term Energy Acquisition Plan (LEAP) objectives and guidelines
(CMR: 158:07), which contain direction to treat energy efficiency as the first resource to be
procured before renewable energy or traditional "brown" energy. The City's 2007 Climate
CMR: 188:10 Page 1 of 10
Protection Plan (CPP) also relies on electric efficiency and load reduction goals to meet
greenhouse gas (GHG) reduction targets by 2020.
The City is also subject to state legislative and regulatory mandates. State law AB 1890 (1996)
requires that all electric utilities collect funds for "Public Benefit" purposes. These purposes are
defined as cost-effective efficiency, new renewable energy, research and development of energy
technologies, and/or low income rate discounts and efficiency programs. SB 1037 (2005)
requires public utilities to first acquire all cost-effective, reliable and feasible energy efficiency
resources before investing in commodity supply. AB 2021 (2006) requires municipal electric
utilities to develop ten-year electric EE plans and submit them to the California Energy
Commission (CEC) every three years. This updated 2010 Plan meets the AB 2021 regulatory
requirement and must be filed by June 1, 2010 with the CEC.
Loading Order for Efficiency and Renewable Energy
State law requires that utilities follow a "loading order" for energy resources (SB 1037). The
loading order means that utilities first procure cost-effective energy -efficiency, then renewable
energy, and finally fossil -fueled electricity.
If the LEAP goals are achieved, by 2015 the City of Palo Alto Utilities' (CPAU's) long-term
electric supply portfolio is expected to be composed of hydro supplies (50%) and renewable
energy supplies (33%), with the balance (17%) purchased from fossil -fuel based generation. The
EE achievements will help in reducing the need to rely on this fossil -fuel based electric supply.
The efficiency savings also reduce the need to purchase the higher cost renewable energy supply
needed to meet the City's 33% renewable portfolio standard (RPS).
While CPAU expects renewable supplies to be 20% of its electric portfolio in 2010, achieving
the Council -set RPS goal of 33% renewable energy supplies by 2015 is expensive. Long-term
fossil fuel -based electricity supplies cost approximately 7 to 8 cents per kilowatt-hour (¢/kWh);
however, long-term renewable energy supplies cost 10 to 11 ¢IkWh, a premium of 3 to 4¢/kWh.
This premium is mainly driven by the demand for renewable resources to meet California's state -
mandated RPS goals —currently 20% by 2020 and likely to be 33% by 2020.
This high cost premium for renewable energy is another reason to ensure that EE receives higher
priority, as every 100 kWh of energy saved reduces the need to purchase 67 kWh or fossil -fuel
energy and 33 kWh of high cost renewable energy. In addition to lowering energy purchase cost,
every unit of electricity not consumed reduces costs related to transmission delivery,
transmission congestion, and losses in the delivery system. EE is the most cost efficient way for
a utility to reduce greenhouse gas emissions while simultaneously reducing the energy bill for
customers who implement efficiency measures.
The 2007 Ten -Year Electric Energy Efficiency Plan
Consistent with state law, the City Council approved the 2007 Ten -Year Electric EE Plan on
April 2007 (CMR:216:07). This plan developed a number of goals to meet the City's Climate
Protection Plan, as well as support the Long Term Energy Acquisition Plan (LEAP) objectives
and guidelines (CMR: 158:07). The 2007 Plan's goal was to meet 3.5% of the electric energy
needs of the City by energy efficiency by the end of the 10 -year planning period. In addition to
the 10 -year goal to achieve a cumulative 3.5% energy use reduction by 2016, there are
incremental goals for each year of the plan.
CMR: 188:10 Page 2 of 10
The Table below (Table 1 in the 2010 EE Plan) provides the summary EE goals, achievements,
and expenditures over the past two years. In FY 2008, an annual net savings of 4,399 megawatt -
hours (MWh) (or 0.44% of annual load) was achieved at a cost of $1.48 million. On a life cycle
basis, the average cost of the saved energy was 3.1 cents per kilowatt-hour (¢/kWh). The annual
savings increased to 0.47% of load in FY 2009, which was achieved at a cost of $1.79 million.
The City anticipates it will achieve incremental EE savings of 0.5% of annual load for FY 2010.
Table 1: Electricity Efficiency Achievements for FY 2008-09
FY 2008
(Actuals)
FY 2009
(Actuals)
FY 2010
(Projections)
Efficiency — Goals
Annual energy savings (MWh)
2,500
2,800
3,500
Percent of Annual Load
0.25%
0.28%
0.35%
Energy —Achievements
Lifecycle energy savings (MWh)
48,220
51,426
TBD
Annual energy savings (MWh'
4,399
4,668
TBD
Percent of Annual Load
0.44%
0.47%
0.5%
Budgets & Expenditures ($M)
Customer Rebate
0.48
0.6
TBD
Program Administration/Contractor
1.00
1.17
TBD
Total Cost
1.48
1.79
TBD
Average life -cycle savings cost (¢/kWh)
3.1¢
3.5¢
TBD
The table shows that the actual achievements were significantly higher than the goals set in the
2007 EE Plan.
Current Programs
Since the approval of the 2007 Ten -Year EE Plan, considerable progress has been made in
expanding programs, retaining contractors to implement third party programs, and enhancing
educational outreach. Numerous new programs were developed and/or expanded to increase
efficiency savings from hard -to -reach customers. Some of these programs are managed by in-
house staff, such as the low-income weatherization, lighting and appliance direct install program
(Residential Energy Assistance Program or REAP). Others are administered by third party
companies under a contract, managed by Utility Marketing Services staff. For example, the
Ecology Action -administered program to install measures at traditionally hard -to -reach small
commercial sites (Right Lights+) was increased from a contract of $200,000 to $500,000 per
year. The expanded contract increased both the types of measures that could be rebated and the
authorized budget for energy savings to be reimbursed to the vendor. The expansion in both in-
house and third party administered programs enabled the City to exceed targets established in the
2007 EE Plan.
The technologies that provided EE savings in the past three years were primarily from lighting —
non -residential (Right Lights+) retrofits of fluorescent tube and other fixtures, as well as from
residential compact fluorescent bulbs in the "five for $1.00" promotions, low-income
installations and holiday light exchanges. Non-residential Heating, Ventilating, and Air
CMR: 188:10 Page 3 of 1.0
Conditioning (HVAC) systems and residential refrigerator recycling also provided significant
energy reductions. Staff continuously monitors technologies and other utility programs to
understand the suitability of various measures for promotion within the City. Efficiency
programs are also evaluated annually by an outside contractor (as required by state law) and are
updated whenever deemed necessary.
Finance Committee Review of Renewable Energy Contract
When the Finance Committee considered a proposed contract for renewable power in July 2009
(CMR: 305:09), it asked whether staff was appropriately valuing energy efficiency given the
high prices of renewable power. The Finance Committee recommended that Council direct staff
to work with the UAC and report back to the Finance Committee with a re-examination of the
policies and goals that are being used in the alternate energy program, including the energy
efficiency plans and the electric acquisition policies and plans. In August 2009, Council
approved the Finance Committee's recommendation (CMR: 342:09).
To implement this Council direction, at the November 2009 UAC meeting, staff discussed how it
planned to conduct the study to determine the potential for energy efficiency in the City. Staff
presented different ways to value the avoided energy supply cost when developing the analysis
tool to develop EE potential. Based on that discussion, staff utilized the Market Price Referent
(MPR) as the avoided energy component of the cost when reviewing the EE measure cost-
effectiveness. The California Public Utilities Commission (CPUC) annually establishes the
MPR, which is the pre -authorized price for renewable energy for investor -owned utilities (IOUs),
and becomes the lowest price that CPAU can expect to pay for long-term renewable energy
supplies. The levelized MPR for a 20 -year renewable resource is currently about 10.5 ¢/kWh,
and ranges from 7 to 15¢/kWh for per year (in nominal terms) over the 20 year period.
DISCUSSION
Analysis Model
In order to efficiently assess and meet AB 2021 requirements in establishing the potential for
energy efficiency, CPAU, in collaboration with other Northern California Power Agency
(NCPA) members, engaged a consultant to develop an analytical model for all California
publicly owned utilities (POUs) to use. The California POU Energy Efficiency Resource
Assessment Model (Ca1EERAM) is based on the integration of energy efficiency measure
impacts and costs, utility customer characteristics, utility load forecasts, and utility avoided costs
and rate schedules. The model estimates technical, economic and market potential for EE
measures for residential and commercial customers.
• Technical energy efficiency potential represents the amount of energy efficiency
savings that could be achieved if economic and market barriers are not considered. It is
the product of the energy efficiency measures' savings per unit, the quantity of applicable
equipment in each facility, the number of facilities in a utility's service area, and the
measure's current market saturation. Technical potential estimates include measures that
may not be cost- effective. These estimates, while not realistically obtainable, are used to
establish the outer boundary of what might be achieved.
• Economic energy efficiency potential represents the portion of the technical energy
efficiency potential that is "cost-effective," from a societal perspective, as defined by the
Total Resource Cost (TRC) test. Economic potential does not consider market barriers
CMR: 188:10 Page 4 of 10
that limit a voluntary utility efficiency program's success in encouraging customers to
install energy efficiency measures.
• Achievable energy efficiency (market) potential is an estimate of the part of economic
EE potential that could be attributed to utility energy efficiency programs, recognizing
the effect of a few market barriers. It is modeled to vary with parameters, such as the
magnitude of incentives and customer awareness and willingness to adopt measures.
The model calculates the technical potential including both economic and uneconomic EE
measures. The economic potential includes only EE measures that are cost-effective when
compared to avoided cost of energy. Technologies which are not yet commercially viable, such
as Light Emitting Diode (LED) products, are not considered to be economic. Other measures
(such as windows) are costly to implement and result in such low electricity savings that they are
not cost-effective. Finally, the market potential in FY 2011 is calibrated based on the two full
years of actual program results and projected achievements in FY 2010.
The assumptions used in the analysis include:
• Palo Alto's avoided cost over the 10 -year period ranges from 8 to 12¢/kWh. This
includes the cost of energy, capacity, transmission, the City's carbon adder1 of 1 to
2¢/kWh, and system losses. This calculation (avoided cost plus the carbon adder) is
approximately the same as the current MPR plus avoided transmission and loss charges.
• Utility rebates will be set at 50% of the incremental cost above new standard equipment.
• Penetration of energy efficient technologies is assumed to be similar to that of PG&E
customers in the same climate zone. This benchmarking data is based on statewide
surveys completed for both residential and commercial customers.
It should be noted here that the EE savings counted toward the goal can only include the
incremental EE savings above state or local standards for new equipment. The efficiency goal is
based on 'net savings,' excluding any naturally occurring savings that would have resulted from
appliance replacements over time in the absence of utility EE programs. The savings are
calculated in this way so that utilities encourage installation of the most efficient equipment and
in recognition of that fact that eventually older appliances will need to be replaced with new
models that will, due to updated standards, save energy "naturally."
Analysis Results
The proposed 2010 EE Plan contains an annual electric EE goal of 0.6% of forecast electric load
in FY 2011, with incremental achievements increasing by 0.05% each year until the annual
incremental goal reaches 0.8% in 2015 through 2020.
By 2020, the proposed 2010 EE Plan will cumulatively achieve a 7.2% load reduction. This goal
is more than twice the goal of 3.5% that was set in 2007 and 25% more than what has been
achieved even with significantly higher levels of in-house and third party administered efficiency
1 The City's Climate Protection Plan established a "carbon adder" of $20 per ton of carbon dioxide (CO2) in 2008,
increasing at a rate of 5% per year to use when making investment decisions. When translated to the cost of electric
energy, this carbon adder is about 1 0/kWh, increasing by 5% per year.
CMR: 188:10 Page 5 of 10
programs. The recommended EE goal in FY 2011 is about a 25% increase from actual EE
savings achieved in FY 2009.
Staff also conducted a number of sensitivity analyses with the following results:
• Increasing efficiency goals by an additional 0.1% per year increases implementation costs
by an additional $0.5 million per year.
• Increasing the avoided cost by 1 to 3¢/kWh did not increase the EE economic potential
by much. Lighting, the bulk of residential and commercial economic EE potential, costs
around $0.06 to $0.08/kWh. Very few measures created significant cost-effective savings
in comparison with a higher avoided cost.
• Elimination of the rebates for compact fluorescent lamps (CFL's) reduced residential
market potential by 25%. Since residential savings are about 20% of the entire potential
as an average over the entire period, the net impact to the goals when eliminating CFL
rebates was about 5%.
• Increasing customer incentive level from 50% of incremental costs to 75% resulted in the
model predicting a market potential projection of almost 14,000 MWh, which is triple the
EE savings achieved in 2009; however, these estimates are highly uncertain, as there is
little empirical research on the impact to customer adoption levels when utility programs
offer aggressive incentives.
CMR: 188:10 Page 6 of 10
The projected annual and incremental EE savings are shown in Figures 1 and 2 below.
Figure 1: Annual Incremental Efficiency Savings - Actual and 2010 EE Plan Goals
Figure 2: Proposed 10 -year cumulative EE savings
Percentages represent cumulative
EE savings relative to load
Page 7 of 10
CMR: 188:10
r --
(NI
The estimated potential comes primarily from lighting technologies. These technologies,
including office lighting upgrades to T8 lamps, residential hard -wire and compact fluorescent
lamps, and other measures, are by far the most cost-effective to implement. The model predicts
that the EE market potential will increase over time due to the increased willingness and
awareness about efficiency measures among customers..
The implementation cost to CPAU will increase with this expanded EE goal. Currently, the $1.8
million electric efficiency. budget comes from the state mandated Electric Public Benefit 2.85%
surcharge collected through customer retail rates. Additional funding above this level will be
cost-effective compared to purchasing renewable power and will result in long-term reductions
in the amount of energythat must be purchased on the market. Figure 3 below contains the
actual budget for EE and the projected EE budgets in the future to achieve the higher EE savings
goals in the proposed 2010 EE Plan.
Figure 3: Actual and Projected Efficiency Budget
Millions
Actual 2.1
1.8
1.5
CO Cr)
0 0
N N
2.2
Projected
3.5
3.0
2.6
0
N
{
4.2
N
0 E. 0 0
N N N N
4.5
4.7
4.8
4.9
5.1
co N. co 0) 0
r T T E. N
N N N
To achieve the higher level of EE savings, the budget is projected to increase by over 50% above
current levels to $3 million by FY 2013. This additional EE program expenditure will have a
retail rate impact of around 1% by 2013. Energy efficiency is an investment that returns savings
over a 10- to 15 -year period, as most equipment installed lasts that long and provides energy
savings over the equipment's useful life. The energy savings will result in lower electricity bills
for customers, as they consume fewer kilowatt-hours. Over the lifetime of the equipment, the
cost savings from reduced energy usage exceed the initial investment. Towards the end of the
proposed 2010 EE plan, retail rates will be 5 to 7% higher compared to a scenario without any
EE programs at all, including those funded from Public Benefits funds. The retail rate impact
from the incremental increases in EE programs that are funded from additional supply funds will
CMR: 188:10
Page8of10
result in a retail rate impact of between 3% and 4% by 2020. The average bill will drop by about
1% as a result of the 2010 EE Plan.
Summary of Proposed 10 -year EE Plan Recommendations
The proposed 2010 10 -year EE Plan contains the following recommendations:
• Establish an incremental electric EE savings goal for 2011 of 0.6% of projected annual
energy use and increase this goal by 0.05% per year to reach a 0.8% annual EE savings
by 2015. Maintain this annual incremental savings goal of 0.8% of annual energy use
until 2020.
• Establish a 10 -year cumulative electric EE goal of 7.2% of projected annual energy use to
be achieved by 2020. This effect is shown in Figure 3 below.
• In addition to the $1.8 million Public Benefits funds used for EE measures and programs,
utilize up to $1.2 million per year of additional funding to implement electric EE
programs for three years starting in FY 2011. Part of the enhanced budget could fund the
increased UMS program manager staffing. The supply funding requests will be
determined annually in the budget process.
If these goals can be achieved, the City will exceed the 4.3% cumulative electricity consumption
reduction (2020 target) set under the 2007 Climate Protection Plan (CPP). With an estimated
cumulative savings of 1.4% from programs implemented between 2008 and 2010, plus the
projected 7.2% savings over the next ten years, the cumulative energy savings through 2020
would be 8.6%, or double the 4.3% EE reduction goal in the CPP. The corresponding CO2
emissions reduction is estimated to be 32,000 tons, or approximately 20% of the 145,000 tons of
CO2 emissions associated with the electric portfolio in the base year of 2005.
COMMISSION REVIEW AND RECOMMENDATION
Staff provided a discussion of the proposed methodology to evaluate EE potential at the
November 2009 meeting of the UAC. The UAC supported staff's plan to evaluate the cost-
effectiveness of EE using the cost of renewables as the marginal cost. During its February 3,
2010 meeting, a draft of the 2010 Ten -Year Electric Energy Efficiency Plan was provided to the
UAC for discussion. At that meeting, the UAC reviewed the preliminary results of the potential
study and supported the proposed Plan.
At its March 9, 2010 meeting, the UAC discussed the types of efficiency programs for which the
greatest potential exists (lighting) and requested greater detail on the work performed by staff in
developing, administering, and contract management of programs to support the justification for
increased staffing to complete these activities. After discussion, the UAC voted unanimously to
support the recommendation that City Council approve the 2010 Ten -Year Electric Energy
Efficiency Plan. Draft minutes from that meeting are provided as Attachment B.
RESOURCE IMPACT
If approved, electricity supply funds will be utilized for up to $1.2 million per year to implement
programs for three years starting in FY 2011. Part of the total enhanced budget for EE programs
will need to be used to increase UMS staffing by one to two full-time program managers in order
to expand current and develop new programs to meet the goal of doubling electric energy
CMR: 188:10 Page 9 of 10
savings. The supply funding requests will be determined annually into the budget process. For
FY 2011, temporary staff will be hired to assist in this expanded EE program effort. Permanent
staffing increases may be requested in the FY 2012 budget.
POLICY IMPLICATIONS
Approval of this recommendation conforms to the Council approved Long -Term Electric
Acquisition Plan (LEAP) Guideline which recognizes cost-effective energy efficiency measures
as the principal supply resource and requires that they take priority over the purchase of
renewable and conventional supply sources. Energy efficiency also enables the community to
reduce its carbon footprint and will help achieve the Council approved greenhouse gas reduction
targets by 2020.
ENVIRONMENTAL REVIEW
Approval of this recommendation does not meet the definition of a project, pursuant to section
21065 of the California Environmental Quality Act (CEQA), thus no environmental review is
required.
ATTACHMENTS
A. City of Palo Alto Utilities 2010 Ten -Year Electric Energy Efficiency Plan
B. Excerpted Draft Minutes of the March 9, 2010 Utilities Advisory Commission Meeting
REPARED BY:
REVIEWED BY:
APPROVED BY:
CCHRISTINE TAM, Resource Planner
`.'JOYCE KINNEAR, Manager, Utility Marketing Services
SHIVA SWAMINATHAN, Senior Resource Planner
CITY MANAGER APPROVAL:
ANE RATCHYE
Assistant Director, Resource Management
TOM AUZENNE
Assistant Director, Customer Support Services
Jo'
VALERIE O 1{ DNG
Director, Utilities Department
JAME ENE
City e ager
x
CMR: 188:10 Page 10 of 10
ATTACHMENT A
CITY OF PALO ALTO UTILITIES
TEN-YEAR ELECTRIC EFFICIENCY PLAN 2010
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY 2
2. INTRODUCTION AND POLICY OBJECTIVES 2
3. 2007 ELECTRIC EE PLAN GOALS AND ACHIEVEMENTS SINCE 2007 4
4. EXISTING PROGRAMS AND IMPLEMENTATION STRATEGIES 6
5. LONG TERM EFFICIENCY PROGRAM GOAL SETTING 6
6. EFFICIENCY PROGRAM PLANS FOR FY 2011 TO FY 2013 6
7. STAFFING IMPACT 6
8. PROGRAM IMPACTS: RETAIL RATES, BILLS AND CARBON FOOTPRINT 6
9. CONCLUSIONS AND NEXT STEPS 6
APPENDIX A: SUMMIT BLUE ANALYTICAL FRAMEWORK, ASSUMPTIONS, AND
SCENARIO RESULTS 6
APPENDIX B: SUMMARY OF MODEL OUTPUT OF CPAU ENERGY POTENTIALS 6
APPENDIX C: PROGRAM SCREENING TESTS & DESIGN CONSIDERATIONS 6
APPENDIX D: HISTORICAL PERSPECTIVE OF CITY AND STATE DRIVERS OF
ENERGY EFFICIENCY 6
APPENDIX E: GLOSSARY OF ABBREVIATIONS AND TERMS 6
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
CITY OF PALO ALTO UTILITIES
TEN YEAR ELECTRIC EFFICIENCY PLAN 2010
1. EXECUTIVE SUMMARY
This report outlines the City of Palo Alto Utilities (CPAU) Department's 2010 Ten -Year Electric
Energy Efficiency (EE) Plan (2010 Plan or Plan). The 2010 Plan updates the 2007 EE Plan
approved by the City Council in April 2007. The Plan updates technology and market
parameters, and incorporates lessons learned in implementing programs in the past three years.
During Fiscal Years (FYs) 2008 and 2009, the actual electric efficiency savings achieved
exceeded goals set in the 2007 Plan, with FY 2010 achievements also expected to exceed goals.
Based on this experience and the updated modeling results, the 2010 Plan recommends a 10 -year
cumulative EE saving goal of 7.2%, which is double the 3.5% cumulative savings goal set in the
2007 Plan. The main elements of the updated 2010 Plan are as follows:
1. Establishes an annual incremental electric EE savings goal for FY 2011 equal to 0.6% of
projected annual energy use and increases this goal by 0.05% per year to reach a 0.8%
annual incremental EE savings goal by FY 2015. Maintain the 0.8% annual incremental
savings target until FY 2020.
2. Establishes a 10 -year cumulative electric EE goal of 7.2% of projected annual energy use
to be achieved by FY 2020. This is a doubling of the 2007 Plan's 10 -year cumulative
goal of 3.5%.
3. In addition to the $1.8 million per year Public Benefits funds used for EE measures and
programs, utilize up to $1.2 million per year from supply funds to implement electric EE
programs for three years starting in FY 2011. Part of the additional supply funds could
be used to increase staffing for program delivery. The supply funding requests will be
determined annually in the budget process.
Upon approval of this 2010 Plan by Council, it will be submitted to the California Energy
Commission (CEC) to meet AB 2021 regulatory reporting requirements.
2. INTRODUCTION AND POLICY OBJECTIVES
The Palo Alto City Council adopted a "resource loading order" for electric resources in March
2007 when it approved the Long-term Electric Acquisition Plan (LEAP) Objectives and
Guidelines. The loading order identifies energy efficiency as the top priority and the most
preferable electric resource in the portfolio. The other resources in order of preference are
renewable supply, local ultra -clean distributed generation, and, finally, conventional supply. The
loading order is consistent with SB 1037 (2005) which specified a hierarchy of resources:
efficiency first, then renewable supply, then conventional supply.
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
The City has a very long history of implementing energy efficiency programs, starting in the
1970's. Renewable supplies have also long been a cornerstone of the City's electric resource
portfolio in the form of contracts for hydroelectric power. Starting in 2004, new renewable
supplies began to be delivered to the City in an attempt to meet a Renewable Portfolio Standard
(RPS) goal. By 2015, the City's long-term electric supply portfolio is expected to be composed
of hydroelectric supplies (50%) and renewable energy supplies (33%), with the balance (17%)
purchased principally from fossil fuel based generation in the short-teiin electricity markets. The
EE achievements are a key part of the electric resource portfolio and have helped lower costs,
reduce reliance on fossil -fuel based generation, and reduce greenhouse gas emissions. The 2010
Plan further increases EE goals so that these benefits will continue long into the future.
The cost to achieve the Council -adopted RPS goal of 33% renewable energy supplies by 2015 is
expected to come at a steep cost premium. Long-term fossil fuel based electricity supplies
currently costs approximately 7 to 8 cents per kilowatt-hour (¢/kWh); however, long-term
renewable energy supplies cost 10 to 11 ¢/kWh.
This high cost premium of renewable energy is another motivation to ensure that EE is
considered higher priority, since each unit of long-term electricity saved obviates the need to
purchase 0.33 units of high -cost renewable supply. In addition to lowering energy purchase cost,
every unit of electricity not consumed reduces costs related to transmission delivery,
transmission congestion, and losses in the delivery system. Efficiency and targeted peak -demand
reduction programs also help to improve transmission grid reliability on hot summer days —
periods when the grid is under stress and the delivery system is least reliable.
In November 2009, staff, with input from the Utilities Advisory Commission (UAC), discussed
alternative ways to value the avoided energy supply cost when evaluating EE potential. Based
on those discussions, this analysis used the current costs of renewable power as the value of the
avoided energy cost for EE potential. The California Public Utilities Commission (CPUC)
annually establishes the Market Price Referent (MPR), which is a proxy for cost of renewable
energy supplies. The MPR is the pre -authorized price for renewable energy for Investor -Owned
Utilities (IOUs), and becomes the de -facto floor price CPAU pays for long-tenu renewable
energy supplies. The levelized MPR for a 20 -year renewable resource is currently about
10.5¢/kWh, and ranges from 7 to 15 0/kWh for each year (nominal) over the 20 year period.
Use of the MPR as the avoided cost for evaluating EE conforms to CPAU's loading order which
recognizes cost-effective efficiency measures as the principle electric resource and requires their
priority over renewable and conventional supply sources. The City's 2007 Climate Protection
Plan (CPP) also relies on electric efficiency and associated load reduction goals to meet
greenhouse gas (GHG) emissions reduction targets by 2020. In addition, the CPP established a
"carbon adder" of $20 per ton of Carbon Dioxide equivalent (CO2e), increasing at a rate of 5%
per year beginning in 2008, to use when making resource decisions. When translated to the cost
of electric energy, this carbon adder is about 10/kWh, increasing by 5% per year.
Although Palo Alto has long had aggressive EE programs in place, the emphasis of GHG
emission reductions has renewed the focus on energy efficiency since 2007. The City's 2007
Climate Protection Plan (CPP) found that electricity usage accounted for 145,000 tons of CO2e
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
emissions, equivalent to 20% of the community's GHG emissions in 2005. The CPP relied on
electric EE and established a cumulative load reduction goal of approximately 4.3% (43,000
MWh) to deliver 16,000 tons of CO2e reduction by 2020. The updated 2020 electric. EE goals
recommended in this plan exceeds the 2007 CPP GHG emissions reduction goals.
In addition to Council -set goals for GHG emissions reductions and efficiency programs, the City
is also subject to state legislative and regulatory mandates. AB 2021 (2006) requires municipal
electric utilities to develop Ten -Year Electric EE plans and submit them to the California Energy
Commission (CEC) every three years. The first such plan, the 2007 Ten -Year EE Plan, was
approved by Council in April 2007, and it was later submitted to the CEC as required by the law.
This updated 2010 Ten -Year Electric EE Plan also meets the AB 2021 regulatory requirement. A
more detailed history of City Council actions and state legislative actions is provided in
Appendix D.
3. 2007 ELECTRIC EE PLAN GOALS AND ACHIEVEMENTS SINCE 2007
The 2007 Plan's goals were to achieve 0.25% and 0.28% annual incremental efficiency savings
in FYs 2008 and 2009, respectively, and to achieve a 10 -year cumulative EE saving of 3.5% by
2016. Since the approval of this 2007 Ten -Year EE Plan, considerable progress has been made
in terms of expanding program management, in retaining contractors to implement programs,
and in increasing educational outreach. The actual efficiency gains in the past two years (0.44%
in FY 2008 and 0.47% in FY 2009) were well above the targets and were close to double the
level of savings compared to the prior two years. The City has been successful in exceeding the
2007 Plan's goals primarily because aggressive new programs administered by third parties were
added. These new programs allowed greater marketing to customers without increasing City
staff. In addition, a wider variety of efficiency measures are now provided to customers in an
easy -to -access format.
The electric EE achievements in the past three years came mostly from lighting projects: from
both residential customers (the compact fluorescent lighting "five for $1.00" promotion and
holiday light exchanges) and non-residential (Right Lights+) upgrades to lighting. Also
important to achieving these totals were programs for non-residential Heating, Ventilating, and
Air Conditioning (HVAC) systems and residential refrigerator recycling programs.
Tablel below provides the summary EE goals, achievements, and expenditures over the past two
years. In FY 2008, an annual net savings of 4,399 megawatt -hours (MWh) (or 0.44% of annual
load) was achieved at a cost of $1.48 million. On a life cycle basis, the average cost of the saved
energy was 3.1 cents per kilowatt-hour (¢/kWh). The annual savings increased to 0.47% of load
in FY 2009, which was achieved at a cost of $1.79 million. The City anticipates it will achieve
incremental EE savings of 0.5% of annual load for FY 2010, which is significantly higher than
the goal established in the 2007 Plan of 0.35% of annual load.
4of36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Table 1: Electricity Efficiency Achievements for FY 2008-09
FY 2008
(Actuals)
FY 2009
(Actuals)
FY 2010
(Projections)
Efficiency — Goals
Annual energy savings (MWh)
2,500
2,800
3,500
Percent of Annual Load
0.25%
0.28%
0.35%
Energy —Achievements
Lifecycle energy savings (MWh)
48,220
51,426
TBD
Annual energy savings (MWh'I
4,399
4,668
TBD
Percent of Annual Load
0.44%
0.47%
0.5%
Budgets & Expenditures ($M)
Customer Rebate
0.48
0.6
TBD
Program Administration/Contractor
1.00
1.17
TBD
Total Cost
1.48
1.79
TBD
Average life -cycle savings cost (¢/kWh) 1 3.10
3.5¢
TBD
Tables 2 and 3 below provide a more detailed report of the EE measures implemented,
corresponding savings, and cost during the past two years. The detailed programmatic results are
provided annually to the UAC, Council and the state to meet SB 1037's regulatory reporting
requirement.
5 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Table 2: CPAU EE Program Measures, Savings and Cost Summary for FY 2008
-,. . _. .. Pato`Alto
- - ` '
;3: . .. ,'
: 'resource Savings Summa
.{:
;r.
Cost Summary
Net
Gross
Net
Net Lifecycle
Utility
Utility Mktg,
Program Sector
Demand
Net Peak
Annual
Net Annual
Lifecycle
GHG
Utility
Direct
EM&V, and
(Used in CEC
Units
Savings
kW
kWh
kWh
kWh
Reductions
Incentives
Install
Admin Cost
Total Utility
Report)
Category
installed
(kW)
Savings
Savings
Savings
savings
{Tons)
Cost 1$)
Cost ($)
($)
Cost ($)
Appliances
Res Clothes Washers
HVAC
Res Cooling
36
23
15
20,691
16,553
297,950
182
$ 9,700
$ 6,882
$ 16,582
Appliances
Res Dishwashers
389
3
4
11,808
9,446
122,803
88
$ 18,450
$ 2,068
$ 20,518
Consumer Electronic:
Res Electronics
HVAC
Res Heating
Lighting
Res Lighting
• 22,340
1,338
117
982,482
785,986
6,919,832
3,694
$ 95,364
$ 206,909
$ 305,272
Pool Pump
Res Pool Pump
3
2
1
4,200
3,360
33,600
19
$ 750
$ 560
$ 1,310
Refrigeration
Res Refrigeration
801
74
74
596,206
476,965
8,585,366
4,657
$ 69,815
$ 151,016
$ 220,831
HVAC
Res Shell
78
4
4
4,058
3,270
65,407
37
$ 22,225
$ 3,496
$ 25,722
Water Heating
Res Water Heating
Comprehensive
Res Comprehensive
Process
Non -Res Cooking
HVAC
Non -Res Cooling
270
5
3
1,162,999
930,399
10,072,724
5,358
$ 60,441
$ 153,690
$ 214,131
HVAC
Non -Res Heating
Lighting
Non -Res Lighting
9,747
367
318
2,152,720
1,722,176
19,266,557
10,666
$ 174,419
$ 405,754
$ 580,173
Process
Non -Res Motors
11
17
13
111,878
89,502
1,342,538
714
$ 2,850
$ 20,850
$ 23,730
Process
Non -Res Pumps
Refrigeration
Non -Res Refrigeration
5
5
5
79,885
63,908
620,173
327
$ 15,980
$ 17,806
$ 33,786
HVAC
Non -Res Shell
Process
Non Res Process
Comprehensive
Non Res Comprehensive
3
110
110
333
266
2,664
1
$ 525
$ 40
$ 555
Other
Other
933
753,575
297,067
891,202
493
$ 2,775
$ 39,232
$ 42,008
SubTotal
34,597
1,950
656
5,890,865
4,398,899
48,220,815
26,215
$ 476,324
$ 1,008,304
$ 1,484,628
T&D
T&D
1 156 156 763,575 38,178,750 20,128
Total
34595 2,106 822 5,890,865 5,162,474 86,399,565
EE Program Portfolio TRC Test
2.43
46,343
$ 476,324
$ 1,006,304
Table 3: CPAU EE Program Measures, Savings and Cost Summary for FY 2009
$ 1,484,628
Paro-
Program Sector
(Used in CEC
Report)
Alto
Category
Units
Installed
Resource Savings Summary :`',°;
Net Gross
Demand Net Peak Annual
Savings kW kWh Net Annual
(kW) Savings Savings kWh Savings
Net
Lifecycle
kWh
savings
Net Lifecycle
GHG
Reductions
(Tons)
Utility
Incentives
Cost ($)
Cost:Su€nmar},-
Utility Utility Mktg,
Direct EM&V, and
Install Admin Cost
Cost ($) ($)
.
Total Utility
Cost ($)
Appliances
Res Clothes Washers
290
2
2
48,006
38,405
384,048
212
$ 20,390
$ 6,797
$ 27,187
HVAC
Res Cooling
22
2
1
8,550
6,840
123,120
79
$ 5,800
$ 3,204
8 9,004
Appliances
Res Dishwashers
343
3
3
15,092
12,074
156,957
87
$ 17,150
$ 2,829
$ 19,979
Consumer Electronic
Res Electronics
HVAC
Res Heating
Lighting
Res Lighting
8,953
427
89
1,023,296
818,637
9,222,662
4,927
$ 195,903
$ 156,784
$ 354,687
Pool Pump
Res Pool Pump
7
5
3
9,800
7,840
78,400
43
$ 1,750
$ 1,388
$ 3,138
Refrigeration
Res Refrigeration
658
71
71
559,874
447,899
8,062,188
4,373
$ 48,185
$ 143,845
$ 192,030
HVAC
Res Shell
81
5
5
19,180
15,344
306,581
173
$ 20,718
$ 6,123
$ 26,841
Water Heating
Res Water Heating
Comprehensive
Res Comprehensive
Process
Non -Res Cooking
1
2,262
1,810
21,715
12
$ 350
$ 382
$ 732
HIVAC
Non -Res Cooling
203
7
7
1,157,899
926,319
9,889,412
5,265
$ 76,041
$ 166,548
$ 244,590
HVAC
Non -Res Heating
Lighting
Non -Res Lighting
3,412
354
321
2,199,922
1,759,938
19,379,044
10,732
$ 156,032
$ 554,446
$ 710,478
Process
Non -Res Motors
-
Process
Non -Res Pumps
Refrigeration
Non -Res Refrigeration
21
65
65
787,197
629,758
3,770,540
1,988
8 70,192
$ 121,342
$ 191,534
HVAC
Non -Res Shell
Process
Non Res Process
7
896
717
9,318
5
$ 140
$ 152
$ 292
Comprehensive
Non Res Comprehensive
24
883
883
2,664
2,131
21,312
11
$ 4,200
$ 341
$ 4,541
Other
Other
10
$ 750
$ 750
SubTotal
14,032
1,825
1,452
5,834,639
4,667,711
51,425,595
27,908
$ 517,601
$ 1,168,182
$ 1,788,783
T&D
T&D
Total
I 14,032 1,825 1,452 5,834,639 4,667,711 51,425,595 27,908
EE Program Portfolio TRC Test
2.46
$ 617,601 $ 1,168,182 $ 1,785,783
6 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
4. EXISTING PROGRAMS AND IMPLEMENTATION STRATEGIES
A summary tabulation of existing utility funded electric efficiency programs is shown in Table 4
below.
Table 4: CPAU's Existing EE Programs
9i
s i
! !8 4 g4
UMS Staff
0 1i
Rebate customers for purchasing and installing energy
efficient appliances, insulation, furnaces, pool pumps,
water heaters, and other items.
All Residential
Smart Energy program
All Residential
Refrigerator Recycling
JACO
Rebate customers $35 for removing an old working
refrigerator. Unit recycled.
All Residential
Residential New
Construction Rebate
UMS Staff
Rebate customers who exceed City's Green Building
Ordinance up to $900.
Low Income
Residential
Low Income
Residential Energy
Assistance Program
(REAP)
Synergy
An energy specialist visits residents' homes and
performs a free energy audit. Recommendations are
given for energy saving measures. Replacements and
repairs are made to insulation, weather stripping,
lighting, refrigerators, and furnaces (if needed).
AII Residential
Residential Home
Energy Audit
Aclara
On -Line energy audit of household energy and water
use.
All Residential
Green@Home Home
Acterra
Acterra provides free in -home energy audits and electric
meter information (blue line monitors).
All Residential
Training and
workshops
Various
Contractors and
Staff
Workshops on energy and water conservation issues for
the public.
Small Business
Right Lights+
Ecology Action
Contractor performs energy audit on facility, recommends
changes, assists customer in making upgrades, and
completes paperwork for rebate.
All Business
Commercial
Advantage Program
(CAP)
UMS Staff
Rebates on installation of the following energy efficient
equipment types: lighting, HVAC, chillers, boilers, food
service, refrigeration, office equipment, appliance, &
custom saving programs.
All Business
Business New
Construction Rebates
UMS Staff
Rebates for new construction exceeding City and state
energy requirements.
All Business
Data Center Efficiency
Program
UMS Staff
Rebates for server virtualization and other data center
efficiency measures.
Large Business
Commercial &
Industrial Energy
Efficiency Program
Enovity
Commissioning and installation assistance for large
businesses installing efficiency measures. `
Business Kitchens
Efficiency Programs
for Commercial
Kitchens
National
Resource
Mgmt
Direct installation assistance for efficiency measures in
commercial kitchens.
Ali Business
Training
Various training and workshops for business customers,
including Life Cycle Costing, Building Operator
Certification, and others.
Large Business
Large Customer
Facility Manager
Meetings
UMS Staff &
Others
Training on a variety of efficiency measures, from chillers
to LEED certification on buildings. .
Large Business
MeterLinks
Automated
Energy
On -Line access to metered utility usage for large
customers.
7 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Staff utilized the following guidelines in implementing EE programs:
• Programs shall be cost-effective on a CPAU combined utility basis. Some residential
items, such as washing machines, dishwashers, and insulation are not cost-effective
on electricity alone, but are when considering all utility commodities. Other items,
such as window replacements, remain'not cost-effective even when all utility savings
are calculated and are not, therefore, rebated. Limited -time promotion may be offered
for emerging technologies such as LED spring light campaign.
• Programs shall be similar in nature to those available in surrounding communities, for
ease of customers and of contractors.
• Programs for hard -to -reach customers (low income or small commercial) are
designed to gain as much customer involvement as possible, including providing
direct install options at no cost to the customer. Other customer groups will need to
participate in the costs of efficiency implementation.
• Programs will not intent customers to install new high -electric using equipment for
example; customers will not be rebated for the installation of new residential air
conditioners where none has existed previously.
• Funding for programs should be reasonably balanced across residential and non-
residential customer classes, in similar proportion to their payments of utility Public
Benefit charges.
• Existing programs are screened every year and programs budgets adjusted annually to
achieve goals optimally.
Staff continuously monitors EE technologies and other market parameters to understand the
suitability of promoting various efficiency measures within the City. Efficiency programs are
evaluated annually and updated whenever deemed necessary. In addition, the long term
efficiency potential is assessed every three years. An illustration of the program planning,
implementation, and reporting cycle is shown in Figure 1.
8 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Figure 1: Illustration of Efficiency Program Assessment, Implementation, and Reporting
Process
Every 3 Years
Set Long-terrn
Goals
Efficiency Potential
conornic & Market Analysis
of Efficiency Measures
Avoided Cost Assessment
C Existing Programs &-
Performance
• Adjust Short- / Incorporate
..term Targets into Load
•
& Budgets \ - Forecast
Program Implementation
Annual
New Technologies,
Programs, Concepts
Measurement.
& Verification
Annual
Regulatory
Reporting.
� f �
Over the past five or more years, efficiency programs have focused on the following program
areas:
• Getting businesses to upgrade to T8 fluorescent lighting with electronic ballasts as
replacements for older technology T12 lamps with magnetic ballasts. As technology
has developed, newer T8's have also continued to improve savings, allowing
customers to upgrade to the newer lights and continue to improve efficiency.
• Supporting residents in the replacement of incandescent lighting with compact
fluorescent lights (CFL's).
• Incenting the replacement of older and inefficient HVAC equipment and appliances
with items achieving greater energy savings than the minimum efficiency standards at
the time of replacement. For example, residents are encouraged to replace
refrigerators with ENERGY STAR® certified models, while businesses are
encouraged to exceed the State of California's Title 24 energy budget requirements
when upgrading HVAC systems.
• Making it easier for hard -to -reach customers (low income and small commercial) to
make EE upgrades through direct install programs.
9 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
• Reaching deeper into building performance and into higher levels of savings through
the more extensive new construction rebates and the Commercial and Industrial
Energy Efficiency Program (CIEEP).
• Working with community groups, such as Acterra, the Community Environmental
Action Partnership (CEAP) and Wave One, to increase the community's knowledge
of and participation in programs.
• Expanding upon educational opportunities for all customers, from students to facility
managers at the largest customer sites in Palo Alto.
5. LONG TERM EFFICIENCY PROGRAM GOAL SETTING
In order to assess the market and technology landscape and bring analytical rigor in setting the
new Ten -Year Electric EE goals to meet AB 2021 requirements, CPAU, in collaboration with
other Northern California Power Agency (NCPA) members, engaged a consultant to develop a
new energy efficiency potential assessment model. The model estimates technical, economic
and market potential for residential and commercial customers.
Technical potential is the energy savings that would result from
installation of the most energy efficient measures that are readily available
in the market.
Economic potential is the energy savings that would result from
installation of only the cost-effective measures. Energy savings from
non -cost effective measures such as ground source heat pumps for
residential homes are excluded in the economic potential.
Market potential is a subset of the economic potential that reflects the
reality of customers' awareness and willingness to adopt certain measures
customer's willingness is in turn influenced by messaging, incentive level:
and retail rates.
One of the key criteria used in determining the EE goals is the cost-effectiveness of BE
programs. AB 2021 requires that "each local publicly owned electric utility, in procuring energy
to serve the load of its retail end -use customers, shall first acquire all available energy efficiency
and demand reduction resources that are cost effective, reliable, and feasible."1 For the purpose
of EE program planning and evaluation, staff uses both the Total Resource Cost (TRC) test and
the Utility Cost Test (UCT) to deteiinine the cost-effectiveness of the programs (see Appendix B
for the definition of the cost-effectiveness tests). The TRC accounts for the benefits and cost to
both the utility and its customers, while the UCT test provides a cost comparison of supply-side
resource and energy efficiency from a utility procurement standpoint. A TRC ratio that is greater
than one indicates that the EE program is beneficial to the community (i.e. it costs the
1 Public Utilities Code, Section 9615 (a)
10 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
community less than the cost of not doing it), while a UCT ratio greater than one indicates that
each kWh of avoided energy costs the utility less than each kWh of energy purchased.
The EE potential model is used to determine the available and feasible energy efficiency
potential over the 2011 to 2020 period. The following input assumptions are used in the analysis:
• Palo Alto's avoided supply cost over the 10 -year assessment period ranges from 8 to
120/kWh. These costs include cost of energy, capacity, transmission, the City's carbon
adder of 1 to 20/kWh, and system losses. This calculation (avoided cost plus the carbon
adder) is approximately the same as the current MPR plus avoided transmission and loss
charges.
• Utility rebates are set at 50% of the incremental cost (above new standard equipment) for
the EE measures.
• Penetration of energy efficient technologies is assumed to be similar to that for PG&E
customers in the same climate zone.
The model calculates the full technical EE potential comprising both economic and uneconomic
EE measures. The economic potential includes only cost-effective EE measures. The market
potential in 2011 is calibrated based on the last two full years of actual program results and
projected efficiency achievements for FY 2010. Market potential generally increases over time
as customers' attitude toward EE measures change.
It should be noted here that the EE savings that are counted toward the goal can only include the
incremental EE savings beyond state or local standards for new equipment. For example, if an
old refrigerator is replaced, allowed EE savings are calculated by subtracting the energy used by
the new refrigerator less the energy used by a standard new refrigerator. If only a standard new
refrigerator replaces the old refrigerator, no EE savings are counted.
EXAMPLE: Using numbers to illustrate this example, assume:
• The old refrigerator uses 1,500 kilowatt-hours per year (kWh/yr),
• A new standard refrigerator uses 600 kWh/yr, and
• A new super efficient refrigerator uses 400 kWh/yr.
The energy savings that can be counted is the difference between the
energy used by the new super efficient refrigerator and the standard
model, or 200 kWh/yr (600 kWh/yr — 400 kWh/yr) even though the
actual savings will be 1,100 kWh/yr (1,500 kWh/yr— 400 kWh/yr).
The efficiency goal is based on 'net savings' that excludes any naturally occurring savings that
would have resulted from appliance replacements over time in the absence of utility EE
programs. The savings are calculated in this way so that utilities encourage installation of the
most efficient equipment and in recognition that eventually older appliances will need to be
replaced with new models that will, due to updated standards, save energy "naturally." This
method also ensures that the savings last as long as the appliance and not just until the old
appliance would have been replaced.
11 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
There are a number of market realities that needs to be considered when setting EE goals. There
are many barriers to achieving all of the economic potential. Long equipment turnover cycles is
one such barrier - many items will continue operating, albeit inefficiently, beyond the end of
their useful life. With limited financial resources, customers may choose to keep an older piece
of equipment instead of purchasing a new efficient model with lower energy costs as
replacement, especially if the payback period is more than 1 to 2 years. In other situations, the
customer may be resistant to adopting a new efficient technology due to perceived risk or
differences in operational characteristics. As an example, many residential customers continue
to dislike compact fluorescent light bulbs due their limited dimming ability and mercury content.
New EE goals should be set realistically from both the perspectives of program and budget
ramp -up. New programs take time to establish and expand. Recent program achievements and
expenditures should be taken into consideration in the goal -setting process. Staff also analyzed
the impact on customer rates, customer bills and staff resources. These results are presented in
section 8.
Proposed Ten -Year Electric Energy Efficiency Goals (2011 — 2020)
Based on the model assumptions stated earlier, staff recommends setting an incremental electric
EE savings goal for FY 2011 equal to 0.6% of projected annual energy use, and increasing by
0.05% per year to reach 0.8% annual incremental EE savings by FY 2015. This results in a 10 -
year cumulative electric EE goal of 7.2% of the projected annual energy use to be achieved by
2020. These proposed goals are based on the market potential as projected by the EE potential
study during the 10 -year period. Figure 2 shows the cumulative EE savings expressed in MWh
and as a percentage of the projected load between 2011 and 2020.
Figure 2: Proposed 10 -year cumulative EE savings
Percentages represent cumulative
EE savings relative to load
12 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Proposed Electric Energy Efficiency Program Budget
To develop the goals, staff took into consideration past actual program achievements and
expenditures. The recommended EE goal for FY 2011 is over 25% higher than the actual EE
savings achieved in FY 2009. The projected EE budget is based on the proposed goals. Based
on the model results, the projected EE budget for 2011 is $2.2 million, which is also about 25%
higher than the actual EE expenditure in FY 2009, By 2014, the projected EE budget is
approximately double that in FY 2009 (see Figures 3 and 4 below).
Figure 3: Actual and Projected Annual EE savings
13 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Figure 4: Actual and Projected Annual EE Budget
$6 Millions
$5 —
$4 —
$3 —
$2
$1
1.
1.8
1.5
I
2.2
3.5
3.0
2.6 —
4.7
4.8 4.9 5.1
4.5
4.2
O
f� co 6? O — N M 'd LC) to N- co C
O O 0 t r r r r t-- r r N
O O O 0 0 0 0 0 0 0 O O O 0
N N N N N N N N N N N N NN
Projected Electric Energy Savings by End Use
In teriiis of the expected distribution of EE savings, residential EE program savings represent
around 28% of the total EE savings in FY 2011; this ratio drops to 17% in 2012. By comparison,
residential load represents makes up around 16% of the City's total load. As shown in Figures 5
and 6, lighting measures represent the bulk of the residential and commercial potential EE
savings. However, federal legislation requires that all general-purpose light bulbs be 30% more
energy efficient than current incandescent bulbs beginning in January 2012, This reduces the
potential for residential EE savings, but has a lesser impact on commercial EE savings.
14 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Figure 5: Projected Residential EE savings by end use
Figure 6: Projected Commercial EE savings by end use
HVAC/Shell
DAppliances
Water Heat
D Lighting
^�i
Jar''+'
D Other
® HVAC/Shell
o Refrigeration
D Lighting
-, r�
� �
f`s>.
e
.... .
� ..6s .f a
�a �s Ord
rd ;.'r
'
fF f,
�f � a
` �:
f°fY .:r
�.
rsasr'
15 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
6. EFFICIENCY PROGRAM PLANS FOR FY 2011 to FY 2013
While CPAU has been successful in ramping up the efficiency gains from utility programs in the
past three years, the level of effort and cost for implementation continues to rise. The likelihood
of achieving the 0.6% to 0.8% goals set is highly dependent on customer response. The slow
economy and harder economic times have adversely impacted efficiency programs of sister
utilities and have been felt by CPAU, too. Hopefully the considerable amount of grants and tax
credits being provided for energy efficiency in the coming years will continue to increase interest
in energy efficiency investments by residential and commercial customers.
In the next three years, Light Emitting Diode (LED) technology is projected to become more
available to customers. Several lighting styles are near to reaching commercialization, both in
cost and in capabilities. In the next two years, some are projected to achieve ENERGY STAR
quality rating. A few competitive and effective technologies are now available, such as LED
case lighting for commercial refrigeration units and holiday lights. These technologies are
expected to continue to come down in price and, thus, become more accessible to customers.
CPAU will continue to implement the recently developed new construction rebates for residents
and businesses. The commercial lighting (Right Lights) program is recently enhanced with new
efficiency measures for commercial kitchens and other businesses. A new Commercial and
Industrial Energy Efficiency Program (CIEEP) that offers technical assistance and cash
incentives to large businesses is being implemented. New programs will need to be continually
developed as existing programs reach maturity and market saturation. The Commercial
Advantage offerings will continue to be re -optimized to better reflect current technology,
customer needs, and costs. All residential programs will be reviewed to ensure cost-effective
delivery and to integrate the rebate programs from electricity, natural gas, and water utilities.
Staff is implementing a Home Energy Report, which will provide residents with a monthly
comparison of their electric and natural gas usage with those of similar homes in the area. Staff
plans to expand the program to include water comparisons in the next year. The program is
being partially funded by the Federal Government's stimulus funding through the Energy
Efficiency Community Block Grant Program (EECBG). Hopefully this comparative report
along with the ongoing emphasis on climate change will increase the focus of residential
customers on improved efficiency. On the other hand, continued tightening of both federal and
state (Title 24 and Title 20) efficiency requirements for equipment and appliances, as well a
potentially stagnant economy, will make it more difficult for CPAU to achieve its efficiency
goals since only savings above standard requirements can be counted toward goal achievement.
A second efficiency measure being partially funded through the EECBG is the installation of
LED street lights, as a replacement to the City's current High Pressure Sodium (HPS) lamps.
This is a continuation of CPAU's pilot study, conducted in 2009, on a few LED and induction
lamps. Community feedback showed that LEDs are generally preferred over HPS and induction
streetlights and achieved a 30 to 40% energy savings. The biggest drawback of the LED fixtures
is the color of the light output. Compared to the yellowish glow of the HPS streetlights, the light
16 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
output from LEDs appears starkly bluish white. It is anticipated that approximately 10% of
existing HPS fixtures could be replaced with LED fixtures within three years. Replacing all
6,400 HPS fixtures within the City has the potential to achieve up to 0.15% of energy savings
(currently streetlights account for 0.4% of the City's annual electricity consumption).
Also in development are two financing programs: the Electric Efficiency Financing Program
(EEFP) for businesses and the CalifomiaFIRST property tax based financing for residential
efficiency and renewable energy installations. The EEFP will provide zero interest, non -secured
loans to businesses who install efficient equipment, and it is targeted at businesses that rent their
office space. The CaliforniaFIRST program is a joint action program with 14 counties and about
100 other cities. It will allow residents to finance efficient equipment installations and make
payments through their property tax assessments.
CPAU is also working on public -private partnerships with the local non-profit groups. Efforts
with Wave One, and a small business providing refrigeration efficiency measures, Humitech,
where both of these coalitions applied to the CEC for grants under the State Energy Program
unfortunately did not yield desired results. Neither project received grant monies. CPAU
continues to look for ways to coordinate efforts through these partnerships.
Staff is also reviewing several new programs that may require more time to evaluate and
implement. In order to maximize participation and optimize program savings, staff anticipates
sequencing new programs in targeted "blitzes" and may also need to roll out thematic programs
by customer type or business type, such as data centers, industrial motors, commercial
refrigeration or restaurants, for example.
Demand Reduction Programs
Demand reduction relieves stress on the electric grid during peak usage times. Peak load
reduction can be accomplished through more efficient equipment, which reduces peak loads by
lowering the power needed to perform a particular function, or through demand response, which
is the ability to reduce electricity use on short notice for a short period of time.
Demand reduction is not a high priority resource for Palo Alto due to both the temperate climate
and types of loads within the City. The City has a relatively fiat load shape (also called a high
load factor), which results in less need to purchase very expensive peak -time electricity, This
can be compared with utilities in California's Central Valley, such as the Sacramento Municipal
Utility District, Lodi Electric, Redding Electric, and others, who have a sharp "Needle Peak."
This extremely high demand in Central Valley locations is caused primarily from residential air
conditioning loads and requires the utilities to purchase significant amounts of high-priced, and
generally less environmentally preferable, electricity. In these utilities, Demand Response
programs to lower needs during the needle peak are very cost-effective.
In Palo Alto, by contrast, Demand Response programs are relatively less cost-effective. The
2006 report prepared by the consultant RMI for the 2007 Plan came to this conclusion, and the
cost situation has not changed significantly in the past three years. There have been some
17 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
regulatory and legislative actions at both the federal and state level that have resulted in CPAU
re-evaluating demand reduction programs. CPAU is in the process of exploring the
implementation of a volunteer pilot program for large customers. This opportunity may be
enhanced by installing advanced meters, and it is being investigated as part of the preparation of
the smart grid strategic plan.
Programs that Complement Energy Efficiency Programs
Some programs are complementary to efficiency and/or demand response, including advanced
metering at customer locations and deploying sensing and switching devices along the
distribution system. A smart grid road map for CPAU is being undertaken to map out options
and to determine the costs and benefits of different systems.
Other programs that offer promise include supply efficiency (improvements to generation,
transmission & distribution), demand reduction and demand response beyond the proposed
voluntary programs, energy storage, and additional joint programs with NCPA members.
Building -focused alternatives include building code enhancements (such as through the City's
Green Building Program), building permit process, training for inspectors/planners, and special
incentives for ENERGY STAR -rated buildings or similar building energy rating systems.
7. STAFFING IMPACT
CPAU's EE programs must either be implemented by internal staff or by third -party agents
under contract to the City. Whether or not internal staff directly implements a program, any new
initiative requires significant staffing commitments by CPAU. For instance, when a new third -
party program is desired, staff must develop a request for proposals (RFP) and related scope of
work, work with internal City departments to issue the RFP and review responses to it, complete
final contracts and Council approval documents, work with the contractor on the development
and implementation of the program, market the program to customers, inspect work upon
completion of each jab, administer contract payments and timing, and ensure the impact and
process of the program are appropriately evaluated by another third -party Measurement and
Verification consultant (as required by state law). In addition to the process outlined above,
working in a public -partnership arrangement, as opposed to contracting with a more traditional
vendor, requires extensive education on the part of staff to ensure that the private agencies
understand the complex and specific state and federal reporting requirements for all programs.
Thus, regardless of the delivery mechanism selected, the addition of any new efficiency
initiatives requires considerable staffing resources.
CPAU's Utility Marketing Services (UMS) group delivers programs to all customer types for
electric, gas and water utilities, in addition to key account management and fiber optic front-end
services. These nine full-time equivalent (FTE) positions with support from two to three interns
and temporary part-time clerical assistants currently spend one-third to one-half of their time
working in electric EE program management. The level of staffing allocated to program delivery
has not increased over the past several years, except for the approval of a part-time temporary
clerical assistant to input program achievements into the database and to answer residential
18 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
customer requests for information. At the same time, electric EE results have doubled and
reporting requirements to the CEC and others have increased dramatically.
EE results can not continue to increase without providing additional resources todeliver the
programs. While funding is projected to increase through both supply resources and the transfer
of two million dollars from the Calaveras reserve to run the EEFP program for four years, this
funding is all allocated to increased incentives and contractor payments. In order to reach the
goals established in this plan, one to two new,full-time program managers will need to be added
to the UMS staff Upon the approval of this Plan, staff will need to begin requesting additional
staffing through the mid -year process in FY 2011 and/or in the budgeting for FY 2012.
8. PROGRAM IMPACTS: RETAIL RATES, BILLS AND CARBON FOOTPRINT
Electric Energy Efficiency Program Expenditures
Funding for EE programs in the past has principally come from the mandated 2.85% Electric
Public Benefit (PB) surcharge collected through customer retail rates. The total PB surcharge is
expected to remain flat at around $1.8 million between FY 2011 and FY 2020. Any incremental
EE program funding above this level will come from electric supply funds rather than increases
in the PB surcharge. To meet the recommended EE goals for FYs 2011, 2012 and 2013, the
corresponding EE program budgets are estimated at $2.2 million, $2.6 million, and $3.0 million,
respectively.
Figure 7: Projected EE Program Expenditures
Millions
$6
$5
2.7 2 8 2.9
g.
3.1
EE program $ from 2.2
i
$4
supply funds
1.5
3
Eg g
B@itl
8
1.1
4j
�
$.iqq
0
�.
u'
F
# 861
8
8H
$2 -
$1.8M from public
benefit surchage
0.4
f
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s tir=
s
j�s•
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rk
_
_
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s,
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O O O O 0 00 0 0 0 0 0 0 0
N N N N N N N N N N N N N CV
19 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Supply Funding of Electric EE Programs and Retail Rate Impacts
Staff recommends that in addition to the PB• funds used for EE programs, an amount of up to
$1.2 million per year of supply funds be utilized to implement electric EE programs for three
years starting in FY 2011. For the next three years, the total supply funds to be expended for EE
programs is around $2.4 million (see Figure 7 above). This additional EE program expenditure
will have a retail rate impact of about 1% in FY 2013. Energy efficiency is an investment with
return over a 10- to 15 -year period, as most equipment installed lasts longer than 1 year and
provides energy savings over the equipment's useful life. The energy savings will result in lower
electricity bills. Over the lifetime of the equipment, the cost savings from reduced energy usage
exceed the initial investment. Towards the end of the proposed 10 -year EE plan, retail rates
could increase by 5% to 7% due both to the increased expenditure and reduced energy use.
However, the average bill is estimated to drop by 1 to 2%; the average bill for EE program
participants would drop even more.
The actual rate and cost impact is highly sensitive to the measures implemented and the lifetime
of the measures. Since customers implementing the measure will see bill reductions, while the
non -participant bills will increase, EE programs are designed to reach all segments of the
customers to increase the percentage of customers who achieve savings.
Carbon Footprint Reductions
CPAU is on track and projected to exceed the 4.3% cumulative electricity consumption reduction
(2020 target) set in the 2007 Climate Protection Plan. With an estimated savings of 1.4%
between 2008 and 2010, plus the projected 7.2% savings over the next ten years, the comparable
cumulative energy savings through 2020 could be 8.6%, which is double the 4.3% projected in
2007. If this reduction is achieved, the corresponding carbon dioxide (CO2) emissions reduction
is estimated to be 32,000 tons, which is double the reduction estimated three years ago. The
32,000 tons of CO2 emissions reduction represent approximately 20% of the 145,000 tons of CO2
emissions associated with the electric portfolio in the 2005, the base year.
9. CONCLUSIONS AND NEXT STEPS
Upon approval of the 2010 Ten Year Electric Efficiency Plan by the Council, CPAU will submit
the plan to the CEC before June 2010, as required by state law. In summary, the 2010 EE Plan is
as follows:
1. Establishes an annual incremental electric EE savings goal for FY 2011 equal to 0.6% of
projected annual energy use and increases this goal by 0.05% per year to reach a 0.8%
annual incremental EE savings goal by FY 2015. Maintain the 0.8% annual incremental
savings target until FY 2020.
2. Establishes a 10 -year cumulative electric EE goal of 7.2% of projected annual energy use
to be achieved by FY 2020. This is a doubling of the 2007 Plan's 10 -year cumulative
goal of 3.5%.
20 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
3. In addition to the $1.8 million per year Public Benefits funds used for EE measures and
programs, utilize up to $1.2 million per year from supply funds to implement electric EE
programs for three years starting in FY 2011. Part of the additional supply funds could
be used to increase staffing for program delivery. The supply funding requests will be
deteinnined in the budget process.
Staff will continue to review the existing programs based on customer feedback, market data and
technology information. Existing programs will be updatedand new programs will be added in
accordance to the existing program implementation guidelines to ensure that CPAU will meet the
aggressive 2010 EE Plan goals in a cost-effective manner.
21 of 36
APPENDIX A: SUMMIT BLUE ANALYTICAL FRAMEWORK, ASSUMPTIONS,
AND SCENARIO RESULTS
Model Overview
The Energy Efficiency Potential model is developed by Navigant Consulting (formerly Summit
Blue) and contracted through the Northern California Power Agency. The Excel -based model
projects technical, economic and market potential over a 10 -year period for electric efficiency
programs based on the integration of DSM measure impacts and costs, utility customer
characteristics, utility load forecasts, utility avoided costs and rate schedules.
Inputs to the model include:
• base year energy and demand usage as well as energy and demand forecast for the 10 -
year planning period, beginning in FY 2011;
• utility avoided costs;
• utility rates by customer class (residential and commercial);
• estimated number of residential homes (by single family and multi -family) and
commercial floor space by building type;
• energy efficiency measure (technology) characteristics, measure impact and costs;
• initial penetration of base technology and efficient technology by building type;
• estimates of decision maker awareness and willingness by measure;
• customer incentive levels;
• administrative costs; and
• first year calibration estimates (i.e. 2010 residential and commercial EE program
savings as percentage of load).
Model outputs include:
• technical potential for the residential and commercial customer segments, based on
installation of the most energy efficient measures that are readily available;
• economic potential, based on installation of only cost-effective EE measures;
• market potential by year, based on installations of only cost-effective measures,
subjected to decision maker's awareness and willingness to implement the measure;
• naturally occurring efficiency by year, based on energy savings that would have
occurred in the absence of any utility programs;
• estimated administrative and incentive costs by year for utility;
• levelized cost and market potential in year 2020 for all energy efficiency measures;
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
• electric bill reduction by year; and
• cost-effectiveness ratios, based on Total Resource Cost test, Utility Cost Test,
Participant Cost test, and Ratepayer Impact test.
The model covers 28 residential measures and 38 commercial measures. Emerging technologies
that have not yet been widely commercialized, e.g. LED par lamps, are not included. The
measure -level energy savings and costs assumptions reflect the most recent deemed energy
savings and measure costs in the 2010 E3 model used for annual EE program reporting to the
CEC.
Base Scenario Assumptions and Results
As the base scenario, staff used the following assumptions:
• utility avoided costs, which is approximately the same as the current MPR plus
avoided transmission and loss charges;
• penetration of energy efficient technologies similar to PG&E customers in the same
climate zone as Palo Alto; and
• customer rebates (incentives) set at 50% of the incremental cost.
The EE potential model projects that the market potential in 2020 is around 7% of the load
forecast. Figure Al compares the technical, economic and market potential in 2020 for CPAU.
Figure Al.: Energy Efficiency Potential Summary
23 of36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
The incremental market potential generally increases over time, as customers become more
aware of and willing to adopt new EE measures. There is, however, a drop in the incremental EE
potential in the residential sector in 2012. This is due to the new federal regulation that requires
general-purpose light bulbs be 30% more energy efficient beginning in January 2012. This
regulation has a lesser impact on commercial buildings. Figure A2 illustrates the incremental
market potential for the residential and commercial sectors. The combined cumulative market.
potentials add up to 7.2% of projected load in 2020.
Figure A2: Incremental Market Potential for the Residential and Commercial sectors
9,000 MWh
8,000
7,000
6,000
5,000
4,000
3,000 ..
2,000 -'
1,000
0 ..,
Commercial
Residential
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Tables Al and A2 list the top 15 residential and commercial efficiency measures with the highest
market potential in 2020 and their respective levelized costs.
24 of 36
Residential sector
City of Palo Alto Utilities Ten Year Electric Efficiency Plan = 2010
Table Al: Top 15 Measures for Residential Customers
Measure
SF Exist CFL Screw In (>=25W), direct install
Multi Family: CFL Screw In (> 25W), direct install
SF - Exist Energy Star Refrigerator
SF Exist: LED Hpiiday. Lights (100 bulb string)
.. . ..,
Exist Refrigerator Recycling.:removal of seconds refn erator unconditioned space=
Multi -Family: Energy ,StarRefrigerator
Multi Family: LED Holiday Lights (100.,,bulb string)
5F - Exist; Photocells .,.. .
SF Exist: CFL Screw In (16-24W),,direct install.
SF Exist: Shade Trees
SF Exist CFL:Torchiere,.Average Wattage__
Multi Family CFL:Torchiere,Average Wattage
SF Exist,: VSD Pool Pumps_
SF Exist Freezer Recycling removal of secondary freezer unconditioned space_,
—SF Exist CFL Screw In (<=15W), direct Install
Top 15 Total
Energy -
(MWh)
3,253
1,411
771
699
689
514
437
403......
321
291
272
270
223..:.....
194
185
9,932 1,469
Demand - ; Levelized
(kW) Cost/kWh
518 $0.058
224 $0.059
134 $0.122_
0 $0.125
145 $0.054_
89. $0.122
0 ' $0.125__.
_38... �. _,. , $0.107
53 . . . ... . . ' ..$0 085
85 1. . $.Q.032
27 $0.059
77 ;. . . $0060.......
55 $0 136.........
4I
Table A2: Top 15 Measures for Commercial Customers
Office: Metal Halide
Office Metal Halide.
Office: Metal Halide
Health: Metal Halide
Misc Metal Halide
Misc: Metal Halide
Misc: Metal Halide -
Measure
Office High Bay Lighting T5 High Output µ m:
Misc High,6ey Lighting_T5 High Output .. .
Office:Dimmable Electronic Ballasts
Office Plug ,.Load Occupancy Sensor
,
201 350W,,,..(pulse start or ceramic) retrofit of std MH fixture,
100W or less, (pulse start o r ceram ic) retrofit of std M H fixture
101 - 200W, (pulse start or ceramic) retrofit of stdMH fixture_
Misc: Dimmable Electronic Ballasts
201 ; 350W, (pulse start orceramic) retrofit of Std MH fixture
...,.. NAIC5334 ...Lighting.........
20i..- 350W, (pulse start or ceramic) retrofit of std MH fixture,
100# or less,,(pulse start or ceramic] retrofit of std MH fixtureµ
101 - 200W, (pulse start or ceramicl_letrofit_of std,MH fixture,,,
NAICS334: Compressed Air
Misc. Refrigerant Charge.,.
Energy - Demand - Levelized
(MWh) (kW) Cost/kWh
7,633 2,058 _ _$0.059
4,517 943 _$0.053
4,143 1_,108 $0.060
3,010 1,062 $0.025
2,789 750 $0 665
2,788 1 756 $0.061
2,611 1 704 $0.078
2,353 523 $0.056
2,247 1 381 _,,,, $0.042
2,195 i 251 $0.014
2,100 ` - 437 $0.058
1;683 i 350 $0.054
,,683 353 $0.069
1,,532 186 $„0.010
Top 15 Total 42,768 11,178
The model calculates the cost-effectiveness ratios using different cost tests. Results are
summarized in Table A3. Note that residential EE measures are generally less cost effective than
commercial EE measures.
Table A3. Results of EE Cost Effectiveness Test Ratios for the Base Scenario
Participant Gist Utility Cost Test Total Resource Ratepayer Impact
Test Cost Test. Measure
1.21
1.54
0.98
0.85
Commercial sector
1.64
4.76
2.85
1.89
Total Portfolio
1.52
3.80
2.31
1.64
The model projects the TRC ratio for the residential sector to be less than 1 due to the fact that
dishwashers and clothes washers are included in the residential programs. Residential
dishwashers and clothes washer are not cost-effective when only accounting for the electric
savings. However, when the gas and water savings are taken into consideration, these measures
are cost-effective.
25 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Scenario Assumptions and Results
In addition to the base case, staff analyzed other scenarios with different input assumptions to
compare the projected market potential and EE program budget with the base case results. The
scenario definitions and results are given below.
Scenario I:Increase EE goals
by an additional 0.1% per year
Projected EE budget will increase an additional $0.5M per
year.
Scenario 2: Increase carbon
adder by an additional 1 to 3
cents/kWh
No noticeable change in the economic potential due to lack of
EE savings in the $0.11 to $0.13/kWh range. Lighting, which
represents the bulk of residential and commercial economic EE
potential, has levelized cost of around $0.06 to $0.08/kWh.
There are a few non -cost effective measures including
residential duct sealing and ground source heat pumps — these
measures have significantly higher levelized costs, at $0.60
and $3/kWh (gas savings from these two measures are ignored
in the electric potential model).
Scenario 3: Eliminate rebates
for CFLs
Residential market potential drops by over 25%.
Scenario 4: Increase customer
incentive level from 50% of
incremental cost to 75% of
incremental cost.
The model predicts that the increased rebate will increase
customer's willingness to adopt EE measures, with the
resulting market potential of almost 14,000 MWh, which is
tripled the EE savings achieved in 2009. The corresponding EE
program budget is projected to more than quadruple the EE
expenditure in 2009. Such a dramatic increase in EE savings
goals and budget is not realistic from a goal -setting
perspective. Moreover, there is a high level of uncertainty
associated with the projected market potential due to lack of
empirical data to determine customer adoption level when
utility programs offer aggressive incentives.
26 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
APPENDIX B: SUMMARY OF MODEL OUTPUT OF CPAU ENERGY POTENTIALS
Shown below is the model output of CPAU technical, economic and market potential for each of
the 10 year planning horizon for the residential and commercial sectors. The recommended EE
targets for CPAU are based on the market potential results for the first 5 years. The EE savings
target as percentage of load is held constant at 0.8% after 2015 due to uncertainty in the model's
projection of consumer behavior (i.e. willingness to adopt energy efficiency) in the outer years.
There could be increasing level of naturally occurring EE savings as efficiency standards
increase and as customer's willingness to adopt efficiency measures without rebate increase.
These savings are not counted towards the EE goals.
City of Palo Alto Electric Utilities
Energy Efficiency Program Targets
MWti
9,000
8,000
7,000
6,000.;.......
5,000
4,000 .!_......,._.
3,000 ...
2.000 -------
1,000;.,
2011 2012 2013 2014 2015
2016 2017 2018 2019 2020
MWH 5,799 6,290 6,782 7,276 7,906 7,927 7,950 7,973 7,999 8,026
% of Load Forecast 0.60% 0.65% 0.70% 0.75% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
Technical Potential
Energy Potential (MWh)
Residential
Non -Residential
Total All Buildings
Percent of Utility Forecast
Demand Potential (kW)
Residential
Non -Residential
Total All Buildings
Percent of Utility Forecast
46,014 38,229 38,210 38,190 38,168 38,145 38,122 38,100 38,078 38,055
235,333 233,297 233,317 233,337 233,696 233,746 233,957 234,742 235,580 236,477
281,347 271,526 271,526 271,527 271,864 271,890 272,080 272,842 273,658 274,532
28.95% 28.09% 28.06% 28.02% 28.02% 27.51% 27.46% 27.46% 27.46% 27.46%
di'4-22, MirD
Wit 61C1
17,456 16,237 16,228 16,219 16,209 16,198 16,188 16,178 16,168 16,158
61,009 60,592 60,594 60,597 60,638 60,643 60,692 60,896 61,113 61,346
78,465 76,829 76,822 76,816 76,846 76,842 76,881 77,074 77,281 77,504
40.66% 40.02% 39.80% 39.80% 39.82% 39.61% 37.87% 37.78% 37.70% 37.81%
27 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Economic Potential
Energy Potential (MWh
Reside ntial
Non -Residential
Total All Buildings
Percent of Utility Forecast
Demand Potential (kW)
Residential
Non -Res ide ntial
Total All Buildings
Percent of Utility Forecast
Market Potential
Energy Potential (NM)
Residential
Non -Residential
Total All Buildings
Percent of Utility Forecast
Demand Potential (kW)
rfl
m.
Residential
Non -Residential
Total All Buildings
Percent of Utility Forecast
4-001 MY t}Y £3 : tia
41,878 34,095 34,077
226,473 224,437 224,457
268,351 258,532 258,534
27.62% 26.75% 26.72%
10,152
57,015
67,167
34.80%
8,937
56,598
65,535
34.13%
UMW
1,596 1,070
4,079 5,105
5,675 6,175
0.58% 0.64%
8,931
56,601
65,531
33.95%
. • I.Efle.. ipig .Y- E .`=iv4iSE.eG"i'*'4 'P+Bee6d6lank, ,
34,060 34,039 34,018 33,998 33,978 33,957 33,937
224,477 224,837 224,886 225,091 225,846 226,653 227,516
258,536 258,876 258,904 259,089 259,824 260,610 261,453
26.68% 26.69% 26.20% 26.1514 26.15% 26.15% 26.15%
8,924
56,603
65,527
33.95%
MAN
1,220 1,378
5,655 6,542
6,875 7,920
0.71% 0.82%
8,918
56,644
65,562
33.97%
Oct
1,553
7,286
8,839
0.91%
8,91I 8,905
56,650 56,696
65,561 65,601
33.79% 32.32%
1,625
7,654
9,279
0.94%
377 316 343 377 428
1,000 1,261 1,398 1,611 1,778
1,377 1,578 1,741 1,988 2,206
0.71% 0.82% 0.90% 1.03% 1,14%
467
1,863
2,330
L20%
8,898 8,892 8,885
56,886 57,089 57,306
65,784 65,981 66,192
32.25% 32.19% 32.29%
ROOS TAW 041019;
1,552
7,586
9,138
0.92%
459
1,858
2,318
L14%
1,463 1,368
7,445 7282
8,908 8,650
0.90% 0.87%
418
1,839
2,257
1.11%
olog
1,269
7,098
8,368
0.84%
376 337
1,812 1,777
2,188 2,114
1.07% - 1.03%
28 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
APPENDIX C: PROGRAM SCREENING TESTS & DESIGN CONSIDERATIONS
Cost -Effectiveness Testing and Perspectives
The primary aim of cost-effective energy efficiency programs is to reduce utility cost and hence
customer bills while improving the environment. It is worth noting, that though customer bills
for those who participate in programs will be reduced, the retail rate will tend to increase as
distribution system related fixed cost are spread over a smaller volume of energy sales. Thus,
non -participants can expect to have higher utility bills.
What is cost-effective depends on perspective. The five perspectives most commonly used in
efficiency program cost-effectiveness testing are:
1. Participant: An energy efficiency measure that provides net savings to a customer is
cost-effective for them as a "participant".
2. Utility: A measure that lowers overall cost for the utility is cost-effective for the
utility . (also referred to as "Program Administrator"). For CPAU, this
could also be considered the "all ratepayers test" or "average utility bill
test", as it reflects the change in the utility bill to the average customer.
Supply -funded incentives should pass this test to be considered cost-
effective.
3. Total Resource: If the combination of the utility and all customers together save money, it
is cost-effective from a "Total Resource Cost (TRC)" viewpoint. This is
the cost-effectiveness criteria that is required by the CEC and is used in
CPAU reporting.
4. Societal: If the community as a whole is better off, including cost savings plus a
value assigned to environmental improvement or other public benefit, then
it is cost-effective from a societal viewpoint. GHG adder was included in
the TRC in this assessment.
5. Non -Participant: Even if the bill for the average customer shrinks significantly, retail rates
could increase slightly, so that customers who do not reduce consumption
could see a slight increase in rates and therefore bills. This effect is due to
the portion of retail rates that must be collected to pay for fixed costs. For
this reason it is important to design diverse programs to be widely
available in order to facilitate efficiency implementation in as broad a
manner as possible.
The cash flows and relevant costs and benefits that go into calculating benefit -cost ratios from
these different perspectives are illustrated below:
29 of 36
City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Table Cl: Cost -Effectiveness Perspectives and Associated Costs and Benefits
Cost Effectiveness Test ";
Costa
Benefits
Participant Cost Test (PCT)
Does the participant save money?
Measure Cost
Incentive to Customer
Bill Savings
Tax Savings
Utility Cost Test (UCT) — Average Bill
Are utility revenue requirements lowered?
Incentive to Customer
Program Delivery Cost
Avoided Supply Costs
Total Resource Cost Test (TRC)
Sum of Participant + Non -participant
Are total community expenditures lowered?
Measure Cost
Program Delivery Cost
Avoided Supply Costs
Tax Savings
b
Societal Cost Test (SCT)
Do total societal benefits exceed the costs?
Measure Cost
Program Delivery Cost
Avoided Supply Costs
Tax Savings
Societal Benefits
Rate Impact Measure (RIM)
Also known as non -participant test
Are utility rates lowered?
Incentives to Customer
Lost Revenues (=Bill
Savings)
Program Delivery Cost
Avoided Supply Costs
Figure C1: Energy Investment Cost and Benefit Flows
Electric Grid
Program vendors 1
and in-house
Avoided
Cost
Savings
Other
Cost
Savings
Environmental
Benefits
T
Program Cost
CPAu
Energy
Service
Company
T Incentives,
Bill Savings
Lost Net Reveniic=
Parficil)ait Bill Sf vin
Utility Net
Cost Savings
Utility Cost
Total Resource Cost
Measure Cost
Participant
Non -participants
Rate Impact
Societal Cost
Tax
Savings
Total Resource Cost reflects the financial perspective of the Palo Alto community as a whole.
The Utility Cost, Participant, and Rate Impact perspectives should be balanced to ensure lower
average bills and sufficient incentives to achieve participation, but not set so high as to
encourage free riders, to prevent any undue burden on non -participating customers, and to
promote equity.
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Efficiency Program Design and Screening Criteria
Staff will continue to use the following standards when evaluating specific efficiency programs:
• The Total Resource Cost (TRC) perspective for ranking energy efficiency measures and
contrasting energy efficiency investments with supply alternatives from a community
standpoint. This is the required perspective to use when reporting to the CEC and
comparing with other utilities.
• On the supply side, avoided costs include energy, transmission and distribution costs, line
losses, reserve capacity, and externality cost.
• Program portfolio design and incentive levels that produce a group of programs under a
TRC limit and consider customer equity.
• The Utility Cost, Participant, and Rate Impact perspectives are reviewed to maintain
lower average bills with sufficient incentives to achieve participation, but not so much as
to encourage free riders, to prevent any undue burden on customers, and to promote
equity.
• Since there will be participants and non -participants for any one program, CPAU will
develop a portfolio of programs to allow as many people as possible to participate in
some, but not all, programs.
• CPAU needs to explore the threshold for permissible rate impacts. Palo Alto City Council
has already established an acceptable rate impact that defines how much may be spent for
renewable supplies; the same may be able to be done for efficiency, in which case, CPAU
could roll this issue into a LEAP update.
• CPAU's Rate Assistance Program (25% discount on electric and natural gas utility bills
for low-income participants) serves customers for whom efficiency could be most
profitable for CPAU, because the lost revenues and potential rate impact would be
diminished, while promoting equity. All recipients of this program are required to
participate in the efficiency direct install energy efficiency program for low-income
customers, the Residential Energy Assistance Program (REAP). These customers receive
free lighting upgrades, weatherization, and other energy saving measures. In addition,
refrigerators and furnaces can be repaired or replaced, if needed. This reduced the total
utility bill cost to these customers, as well as the cost to other ratepayers for subsidizing
this discount.
• Include a greenhouse gas adder when computing avoided cost.
• Staff will continue to educate and engage the public and City Council about these
impacts. Council guidance is needed for cost-effective efficiency program design, based
on criteria that are simple, clear and measurable, based on total budget, rate impact, and
other factors.
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
APPENDIX D: HISTORICAL PERSPECTIVE OF CITY AND STATE DRIVERS OF
ENERGY EFFICIENCY
CPAU's electric energy efficiency programs were first modified in 1996 with the passage of AB
1890, the electricity restructuring bill, which established a minimum percentage of electric
revenue (2.85%) to be collected and spent in four categories identified as Public Benefits:
1. Cost-effective energy efficiency;
2. Research, development and demonstration in efficiency technologies;
3. New investments in renewable energy; and
4. Low-income programs.
The key California state legislation driving the CPAU's energy efficiency program design and
implementation are SB 1037 (2005) and AB 2021 (2006).
• SB 1037 established a "Loading Order" for electric power resources, specifying a
preference hierarchy of:
1. Energy Efficiency and Demand Reduction;
2. Renewable Energy Supply; and then
3., Conventional Power Supply.
This hierarchy is reflected in the Council -approved. Long-term Electricity Acquisition
Plan (LEAP) Objectives and Guidelines, most recently updated in March 2007. The City
has been complying with this bill by annually reporting to the CEC and public on the
energy efficiency programs and achievements. The reports summarizing the actual
achievement in the past two years have been included in the body of the 2010 plan.
• AB 2021 added new and very specific long-term planning, reporting, review
requirements with specific deadlines, and a requirement to "treat efficiency as
procurement investments...without regard to previous minimum investments,"
highlighted in the graphic below.
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
Figure Di: California ener_ efficient le
AB 1890
(1996)
Public Benefits = 2.85%
• Cost-effective energy
efficiency
• Renewable energy
• Low -Income Assistance
• Research & Development
Invest in Public Good
islation has continued to evolve over the past decade
AB 2021
(2006)
First acquire all available r
energy efficiency and demand I
reduction
• Cost-effective
• Reliable
• Feasible
Report annually to customers
and CEC
• Programs
• Expenditures
• Expected and actual energy
savings results
invest and Report
v
Sam e
10 -year plan every 3 years
• First due to CEC September 1, 2007
• Identify all energy efficiency potential
• Establish annual targets
• Without regard to previous minimum
investments
• Treat as procurement investments
Report targets to CEC within 60 days of
Council adoption of plan
Report annually to its customers and CEC
• Programs
• Expenditures
• Cost-effectiveness
^Expected and actual energy savings
results
• Funding Sources
• Methodologies and assumptions
• Independent M&V evaluation
CEC to include in IEPR and provide
recommendations
invest and Report in a Specific Way
California legislation is only one of many reasons to enhance CPAU's energy efficiency
programs with renewed vigor. Numerous policies and regulations, ranging from the Federal
Energy Policy to CPAU's electric utility long-term resource implementation plans provide
additional impetus. The main motivating polices and regulations that are relevant to energy
efficiency are outlined below.
Long-term Electric Acquisition Plan (LEAP)
a. Guideline 1: Resource Loading Order
Manage a supply portfolio comprising locally selected and joint action cooperative
purchases, with the following preference hierarchy for resource acquisition:
A. Efficiency
B. Renewable supply
C. Local ultra -clean distributed generation
D. Conventional supply
b. Guideline 7: Electric Energy Efficiency and Demand Reduction
A. Fund innovative programs that promote and facilitate deployment of all cost-
effective, reliable and feasible energy efficiency and demand reduction
opportunities as high priority resources.
B. Use a community -wide perspective in program evaluation criteria.
C. Use a bill reduction (utility cost) perspective in program funding criteria.
D. Promote equity by designing and making programs available to all customers
c. Guideline 8: Climate Action Plan
As part of the City's commitment to develop and implement an action plan to reduce
greenhouse gas emissions, develop and implement a Climate Action Plan relating to
utility activities.
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
A. Consider all of the Mayor's Green Ribbon Task Force utility -related
recommendations.
B. The plan shall be consistent with the California Municipal Utilities Association
Greenhouse Gas Reduction Principles.
C. Take actions to meet ICLEI Cities for Climate Protection Campaign milestones.
D. Coordinate with and support Climate Action Plan efforts of other departments.
2. City Policies
a. Comprehensive Plan
i. Policy N-44: Maintain Palo Alto's long-term supply of electricity and natural gas
while addressing environmental and economic concerns.
ii. Policy N-47: Optimize energy conservation and efficiency in new and existing
residences, businesses, and industries in Palo Alto.
b. Sustainability Policy and determination that `Environmental Protection' is one of Council's
top priorities.
c. Climate Protection Plan (December 2007) goals to reduce greenhouse gas emissions.
d. CMUA GHG Principles: Greenhouse Gas reduction principles for publicly -owned
electric utilities endorsed by Council in August 2006 (CMR:315:06).
e. NAPEE MOU: National Action Plan for Energy Efficiency Memorandum of
Understanding endorsed by Council in August 2006 (CMR:316:06)
3. Legislative and Regulatory
a. SB 1037 (2005) — Loading Order [efficiency first, then renewables, then conventional
supply]
b. AB 2021 (2006) - Energy Efficiency [specific planning, funding and reporting
requirements]
c. SB 1 (2006) - Million Solar Roofs [includes energy audit requirements for solar rebates]
d. AB 32 (2006) — Global Warming Solutions Act [sets State targets for GHG reduction to
1990 levels by 2020 and establishes mandatory reporting requirements for utilities]
e. SB 1368 (2006) — Greenhouse Gas Limits On Lang -Term Baseload Electricity Contracts
[baseload electric contracts 5 years or longer or baseload facilities to have greenhouse gas
emission no greater than a reference combined cycle natural gas generator]
f. SB 107 (2006) — Accelerated Renewable Portfolio Standard [moves 20% target to 2010,
new reporting requirements for publicly -owned utilities, procurement plans to achieve
efficient use of fossil fuels]
4. Federal Energy Policy Act of 2005 (new requirements for energy efficiency, tax incentives
(Title 13) and time -differentiated retail rates.
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
APPENDIX E: GLOSSARY OF ABBREVIATIONS AND TERMS
AB1890: California Electric Restructuring Bill/Deregulation (1996)
AB2021: California Energy Efficiency Bill (2006)
AB32: California Global Waiiuing Solutions Act (2006)
APPA: American Public Power Association
BIG: Build -It Green (green building rating system)
CEC: California Energy Commission
CFL: Compact Fluorescent Light
CIEEP: Commercial & Industrial Energy Efficiency Program
CMUA: California Municipal Utilities Association
CPAU: City of Palo Alto Utilities
CPUC: California Public Utilities Commission
CO2e: Carbon Dioxide Equivalent
CPP: Climate Protection Plann.
CW: Clothes Washer
CY: Calendar Year
DEER: California Database for Energy Efficient Resources
DSM: Demand Side Management
E3: Energy & Environmental Economics Inc. (energy efficiency program
design software contractor)
EE: Energy Efficiency
EECBG: DOE -sponsored Energy Efficiency & Conservation Block Grant
EEFP: Energy Efficiency Financing Program
EPAct: U.S. Energy Policy Act
FY: Fiscal year
GHG: Greenhouse Gas (main six are carbon dioxide, methane, nitrous oxide,
chlorinated fluorocarbons, and sulfur hexafluoride)
GRTF: Palo Alto Mayor's Green Ribbon Task Force
GULP: Gas Utility Long-teuu Plan
GWh: Gigawatt-hour, equivalent to one million kWh
HPS:. High Pressure Sodium streetlights
HVAC: Heating, Ventilation and Air Conditioning
IOU: Investor -Owned Utility
IRR: Internal Rate of Return
kWh: Kilowatt-hour
LEAP: Long-tetni Electric Acquisition Plan
LEED: Leadership in Energy & Environmental Design (green building rating system)
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City of Palo Alto Utilities Ten Year Electric Efficiency Plan - 2010
LED: Light -Emitting Diode Light
MMBtu: One million BTUs, equivalent to 10 therms
MPR Market Price Referent
MWh: Megawatt -hour, equivalent to one thousand kWh
NCPA: Northern California Power Agency
NTGR: Net -to -gross Ratio
PAC: Program Administrator Cost test
PCT: Participant Cost Test
PV: Photovoltaics
PLUG -In: CPAU's local ultra -clean distributed generation incentive program
POU: Publicly -owned Utility
RECO: Residential Energy Conservation Ordinance
RIM: Rate Impact Measure test
REAP: Residential Energy Assistance program
RMI: Rocky Mountain Institute
SB1: California Solar Roofs Bill (2006)
SB1037: California Loading Order and Energy Efficiency Bill (2005)
SB 107: California Accelerated Renewable Portfolio Standard 13i11 (2006)
SB1368: California Greenhouse Gas Limits on Baseload Electric Contracts and
Facilities Bill (2006)
SCT: Societal Cost Test
Tonne: One metric tonne, equivalent to 1000 kilograms or 2,205 pounds
TPY: Tonnes per year
TRC: Total Resource Cost
UAC: Utilities Advisory Commission
UCT: Utility Cost Test
UMS: Utility Marketing Services within CPAU
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ATTACHMENT B
EXCERPT DRAFT MINUTES OF MARCH 9, 2010
UTILITIES ADVISORY COMMISSION MEETING
ITEM 1: ACTION ITEM: Ten -Year Electric Energy Efficiency Plan
Assistant Director Jane Ratchye reminded the Commission that this Plan had been brought to the UAC in
February and that, based on comments from the UAC at that time, no changes have been made to the
goals or recommendations in the final report.
Commissioner Berry asked why additional UMS staffing was not being requested now during the budget
process. Utilities Director Valerie Fong said that staffing increases, probably through temporary or hourly
staff, could be requested in the mid -year budget process. Ratchye added that there would be more funds
in the budget for supply -funded Demand Side Management (DSM) activities, and some of the funds could
be used to implement programs or develop contracts with third party vendors.
Commissioner Keller asked for a fuller explanation on how the increased funded for DSM projects would
impact rates. Ratchye responded that the amount for Energy Efficiency (EE) would be going up over a 10 -
year period, which would be a greater cost than would have been expended otherwise. This would
increase retail rates by five to seven percent more than would have otherwise been the case. On the other
hand, participants in the program would reduce their usage, resulting in a lower utility bill for these
customers. The average effect between the increasing rates and the reduced usage would cause an
average impact of an increase of one to two percent overall. Commissioner Keller wondered if bills could
go down for all customers. Ratchye responded that nonparticipants would have increasing utility bills, as
the rates would be going up. She added that the programs are evaluated for cost effectiveness from a
system wide (or Total Resource Cost perspective), not from an individual utility customer perspective.
Fong added that if rates are higher and a customer's consumption does not decrease, that customer's
utility bill will go up.
Chair Melton wondered at the graphs showing that the potential for electric efficiency is primarily in lighting.
Utility Marketing Services Manager Joyce Kinnear responded that lighting is by far the most cost effective
EE opportunity for most customers.
Commissioner Waldfogel expressed a concern in taking allocated supply resource dollars to pay for more
staffing. Kinnear pointed out that in the current budget, supply resources have been paying for rebates in
the solar photovoltaic (PV Partners) program, while Public Benefit Funds have paid for staffing and the
increased contracting requirements necessary for increasing reporting and verification requirements
imposed by the state. Fong noted that the way these programs can ramp up is with more staffing to
execute the programs and manage contracts. She added that these programs are labor-intensive to run.
Commissioner Keller expressed a concern that the report did not mention water rebates. She further asked
how rebates for such appliances as hot water heaters are dealt with in the programs. Kinnear responded
that this report is on energy efficiency programs, so water rebates are not included. She added that water
heaters are considered to be natural gas efficiency measures, since natural gas heats the water.
Therefore, these rebates are paid through the natural gas program.
Commissioner Waldfogel again expressed his concerned that, while he is fine with supply funds paying for
capital or commodities, he is concerned about these funds paying for headcount. Chair Melton pointed out
that he felt the report was unclear on where the funds would come from to pay for this staffing. Fong said
that the supply budget pays for staff to schedule and purchase commodities. She further pointed out that
all transactions in the Utilities Department require human effort to implement and complete programs.
Waldfogel said that staffing is a small percentage of total cost in supply budgets, but a greater percentage
in the marketing budgets. Fong said that the Northern California Power Agency's (NCPA's) power
management cost and bond refinancing costs should also be counted as staffing costs in supply. NCPA's
activities in managing resources make the City's staffing costs for supply activities look small.
Chair Melton pointed out his concern that an increase in budget of $1.2 million from supply would go to
fund marketing staff. Fong said that the marketing staff members are procurement staff —they procure
energy efficiency. Just as the resources staff procures commodities, the EE staff procures efficiency
resources. Waldfogel said that the percentage of staffing costs is higher in marketing than is the case in
the supply areas. Kinnear explained that while the average commodities contract may have six counter -
parties, DSM programs have 25,000 counter -parties. In addition, a DSM contract of $100,000 requires
nearly the same effort to complete the purchase process as does a several million dollar contract for
supplies. There are many more moving parts in the efficiency area, and it is more costly to staff these
areas. Commissioner Eglash summed up the conversation by stating that the EE programs are cost
effective, but require more staffing to implement. Kinnear agreed.
ACTION: Commissioner Keller made a motion to recommend that the City Council approve the proposed
2010 10 -Year Electric Energy Efficiency Plan. Commissioner Ameri seconded the motion. The motion
passed unanimously (6-0).