In the case of host customer NEIs – which are typically difficult to quantify – the Database of Screening Practices shows us that many states use a proxy adder as a methodology to account for various types of NEIs. States like Colorado and Nevada utilize adders to account for the full range of host customer NEIs from their energy efficiency programs, while other jurisdictions utilize adders to account for specific impacts, such as Maryland’s health and safety adder.
The new DSP table summary shows the proxy adder values used by states, ranging from 5% to 25%. However, application of the adders varies: some states apply an adder to only low-moderate income (LMI) program impacts, while others apply broadly to all residential programs; in states that use a proxy adder across residential programs, the value applied to LMI programs may be higher than for non-LMI programs.
In the case of how jurisdictions account for carbon emission impacts in BCAs for efficiency programs, there is considerable variation in the methodologies and values used. Our research shows that jurisdictions often account for carbon emissions as an avoided utility system cost, either embedded into their avoided generation/distribution costs or as an avoided environmental compliance cost.
For states with carbon cap-and-trade systems, such as the Regional Greenhouse Gas Initiative in the Northeast, this value encompasses the cost of compliance with the cap-and-trade system. Other jurisdictions choose to account for carbon as a non-utility system impact (i.e., societal impact). When treated as a societal impact, we found that carbon emissions are often valued higher than when accounted for as a utility system impact. This may be due to the fact that many jurisdictions utilize the Social Cost of Carbon to value societal carbon emissions, which encompasses the full range of damages from carbon emissions that are often not captured as a utility system impact. Some jurisdictions account for avoided carbon emissions as both a utility system impact and a societal impact. This practice allows jurisdictions to account for the avoided impacts of carbon emissions to the utility system as well as other societal impacts, and can avoid double counting when performed correctly. See the MTR Handbook (Chapters 3.2 and 7.1) for guidance on accounting for GHG emission impacts.
The Database of Screening Practices (DSP) is an open-source resource that provides energy efficiency cost-effectiveness testing information for all 50 states as well as Washington, D.C. and Puerto Rico. This database contains information about the cost-effectiveness test(s) used in each jurisdiction, including primary and secondary tests, the assessment level used, discount rate, and analysis period. The database also details the specific utility system, host customer, and societal impacts each jurisdiction includes in their primary test. The database includes visualizations in a variety of formats such as tables, charts, and maps.
The NESP team recently researched updates to state BCA practices and refreshed the database with new information and revised/new documents. See below for a few notable updates:
Connecticut: The Department of Energy and Environmental Protection recently approved the new Connecticut Efficiency Test (CTET) that was developed based on NSPM guidelines. Read more about the CTET here.
New Jersey: In 2020, the New Jersey Board of Public Utilities (BPU) Staff released a proposed interim New Jersey Cost Test (NJCT) as the state transitions to the next generation of energy efficiency and peak reduction programs. Staff used the costs and benefits traditionally associated with the TRC as a starting point for the NJCT. The test also includes additional avoided energy benefits (including T&D costs, ancillary services, and demand reduction induced price effects), and non-energy impacts (NEIs) that are relevant to New Jersey’s policy goals (including avoided emissions impacts, a 10% adder to account for benefits to low-income participants, and a 5% adder to account for NEIs such as public health, water benefits, economic development, etc.).
Illinois: Cost-effectiveness testing in Illinois now includes monetized societal health impacts. Commonwealth Edison (ComEd) updated its TRC test in 2021 by adding an estimated reduction in adverse health impacts due to lower PM 2.5, SO2, NOx, and CO2 emissions. To monetize these benefits, they used the EPA’s AVoided Emissions and geneRation Tool (AVERT) and CO–Benefits Risk Assessment (COBRA) Health Impacts Screening and Mapping Tool.
Pennsylvania: While the Commonwealth had previously applied a discount rate based on the weighted average cost of capital (WACC), about 7%, the Commission issued an order that switched the discount rate to 3% beginning in mid-2021. The Commission argued that it is important to consider whose preferences are reflected by the discount rate and that a 3% rate reflects the preferences of the public at large.
Maryland, Minnesota, Puerto Rico, Washington, and Washington, D.C. have recently applied–or are in the process of applying–the NSPM to update their energy efficiency cost-effectiveness tests. New information will be added to the DSP for these jurisdictions when their new tests are approved.
We are planning another round of updates, with more functionality, to the DSP later this year. If you notice out of date or incorrect state information, please contact NSPM@nationalenergyscreeningproject.org.