Category: Newsletter

States Using the NSPM

States Using the NSPM: MD, DC, WA

(NESP Quarterly February 14, 2022 – with one updated link below for Maryland, since newsletter publication date)

Maryland

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After nearly a year of meetings, the “PC44” EV Work Group submitted a consensus Statewide EV BCA Methodology Report (“EV BCA Report”) to the Commission for approval 12/1/21. The commission accepted the proposal in a hearing 1/12/22 (Commission Acceptance of EV BCA Framework in Case No. 9478 – PC44; ML 238539).

As background, a working group was formed per commission direction in early 2021 to address deficiencies and concerns around the utilities’ EV Pilot BCA methodology (see Office of People’s Counsel comments). The Commission ordered that: “the PC44 Electric Vehicle Work Group develop and propose for Commission consideration a consensus benefit-cost approach and methodology by December 1, 2021 […] The Commission specifically requests that the EV Work Group examine the National Standard Practice Manual and the existing BCA framework used to review the EmPOWER Maryland programs for best practices in developing an EV BCA methodology.” (Maryland PSC Order 89678 in Case 9645 in BG&E Multi-Rate Plan Section 238).

The EV Work Group convened nearly a dozen times to develop an appropriate cost-effectiveness test for valuing utility EV investments, and it used the NSPM BCA framework to guide the process. The EV BCA Report, developed by Gabel Associates, describes the consensus methodology used to develop the EV BCA framework, including a primary test, referred to as the MD-EV Jurisdiction Specific Test (MD-EV JST).

Chris Neme (Energy Futures Group) served as technical advisor to the commission staff on behalf of the NESP. He presented on the Maryland EV WG process and development of the MD-EV JST – with Amanda Best of the Maryland PSC – at a SEEA webinar in December: Electric Vehicle Programs: How to Strike a Balance Between Excitement and Execution. Mark Warner (Gabel Associates) presented on the MD-EV JST and consideration of non-energy impacts at the NARUC Center for Policy Innovation webinar 1/20/22.

Meanwhile, the Future Program Work Group (FPWG) is applying the NSPM to develop a BCA test for the EmPOWER Maryland energy efficiency programs. Proposals on the table, with broad stakeholder support, include adopting an EmPOWER Maryland JST. A final proposal and consensus report to the Commission is due mid-April 2022.

As a result of the EV Working Group process to develop an EV BCA framework, the Leader of the EV WG issued a PSC Staff recommendation to the Commission to consider opening a new proceeding. The recommendation suggested use of the Maryland EV and EmPOWER efficiency BCA developments with the NSPM to create a “Unified BCA” methodology across all DERs. The commission opened Case No. 9674 in December 2021 to explore the process of developing a unified BCA methodology, and issued a request for comments due 2/15/22.

Washington, D.C.

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The Clean Energy DC Omnibus Amendment of 2018, enacted by the Washington, District of Columbia Council, charges the DC Public Service Commission (the Commission) with evaluating the effects of utility proposals on global climate change and in achievement of the District’s commitments to reduce greenhouse gas emissions. In undertaking its charge, the Commission initiated a proceeding through a Notice of Inquiry (Case No. GD-2019-04-M) and directed that a “Clean Energy Act Implementation Working Group” (CEIWG) be convened. In taking these steps, the Commission sought guidance on appropriate GHG and “carbon footprint” measurement and verification metrics; GHG emissions reporting requirements; standards for quantifying and monetizing impacts; and a “Benefit-Cost Analytical Framework” (“BCA framework”), taking into account best practices from other jurisdictions with similar climate goals, all designed to enable the Commission to assess compliance with the Clean Energy DC Act.

The PSC Staff convened and facilitated the CEIWG from fall of 2020 through October 2021. In its very first meeting, Staff cited the NSPM for DERs in a presentation to stakeholders. Smart Electric Power Alliance (NSPM for DERs co-author) presented at a subsequent CEIWG meeting; thereafter, technical advisor Karl Rabago of Rabago Energy and NSPM project coordinator Julie Michals provided direct technical assistance to the PSC Staff team throughout the CEIWG process to develop a report with a recommended BCA Framework to the Commission. The role of the NESP technical advisors – funded in part by E4TheFuture and Lawrence Berkeley National Laboratory – was to provide objective guidance to the Staff and stakeholders on application of the NSPM for DERs.

Over the course of the year that involved a series meetings, the commission Staff received extensive CEIWG input that informed a 325-page majority consensus report filed by Staff with the Commission for review. Staff’s report laid out the background and process, documented majority and non-majority recommendations, and made specific recommendations to the Commission, including that it:

  • Adopt “a consistent BCA Framework, based on the guidance of the NSPM-DER, that can organically evolve in a systematic and economically sound manner to assimilate technology, policy, and market/customer changes, as well as to address multi-sited DERs and their interactive effects; multi-sectoral applications; dynamic utility system optimization planning; and coordinated end-to-end utility planning.”
  • Adopt the NSPM Principles to govern the development and application of the BCA Framework.
  • Ensure alignment of the BCA Framework with applicable District policies by adopting a societal cost test that aligns with the District’s applicable policy goals.

The report also recommended the Commission approve a Phase II process to address methodological approaches to quantifying the impacts indicated in the report and approved by the Commission, including those impacts that are difficult to quantify. The process for Phase II, whether facilitated through rulemaking, another working group, or a combination of both, is to be determined by the Commission.

Washington State

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The 2019 Clean Energy Transformation Act (CETA) requires significant changes to electric utility planning in Washington state including, among other provisions, a transition to clean energy by 2045. CETA also requires utilities to ensure that all customers benefit from the transition to clean energy through the equitable distribution of benefits and reduced burdens. The 2019 legislation created a new requirement, the Clean Energy Implementation Plan (CEIP).

The WA UTC adopted rules in 2020 to guide investor-owned electric utilities’ planning efforts to meet CETA’s mandates. The Commission’s final rules were adopted 12/28/20, in Dockets UE-190698,  UE-191023, and UE-190837. During the rulemaking process, the Commission received stakeholder requests for additional guidance regarding changes to cost-effectiveness test calculations implicit in CETA, in particular concerning distributed energy resources (DERs).

In response to these requests, the UTC opened Docket UE-210804 to investigate cost-effectiveness, with a focus on how CETA necessarily changes the standard practice of using the modified total resource cost test (TRC) and utility cost test (UCT) as the primary and secondary screening tests currently used in the state. The scope of the UTC’s current investigation is to ensure consistent evaluation of distributed energy resources.

The UTC’s Notice of Opportunity to Comment in the cost-effectiveness testing docket states that it will follow the process and principles described in the NSPM for DERs using the NSPM principles. The notice asks a series of questions about the scope and application of the NSPM, to which stakeholders submitted comments in December 2021. In general, the comments indicate that:

  • Stakeholders are supportive of using the UTC’s proposed NSPM 5-step framework process to review existing cost-effectiveness testing practices.
  • Key impacts/issues to address, including methodologies to quantify impacts, are: avoided costs of energy capacity (and load shapes used); program overhead costs; customer costs; program incentives; non-energy impacts; measure life;  incremental cost, measure lifetimes; environmental and societal benefits; economic benefits; public health impacts, energy equity, accounting for federal subsidies; double counting of impacts; symmetry in treatment of benefits and costs; and how each impact should be weighted in the analysis.
  • Stakeholders are mixed on whether the docket should evaluate both electric and gas DER cost effectiveness testing, or only electric.

Next steps are to be determined by the UTC staff, based on feedback they received from stakeholders and priority issues to address.

Meanwhile, in December 2021, Puget Sound Energy (PSE) submitted its draft Clean Energy Implementation Plan (Docket 210795) where PSE indicates (pg. 36) that it followed NSPM guidance to evaluate different suites of DERs to create a portfolio that promotes equity, diverse offerings, and minimizes costs. PSE notes the NSPM recommends any BCA should align with the policy goals of the jurisdiction, and thus chose the Societal Cost Test and Participant Cost Test for their primary and secondary cost tests, respectively.

See the entire February 2022 NESP Quarterly.

Energy Equity and BCA

Energy Equity and BCA

(NESP Quarterly February 14, 2022) — We first posed the question “How do we account for energy equity in BCAs?” in our June 2021 newsletter. We’ve since further collaborated with organizations to evolve our conceptual framework for how and where energy equity fits within benefit-cost analysis. Below is a summary of this framework, which is a work in progress. With further input and refinement from key stakeholders, our aim is to develop compendium guidance to the NSPM this year.

“An equitable energy system is one where the economic, health, and social benefits of participation extend to all levels of society, regardless of ability, race, or socioeconomic status. Achieving energy equity requires intentionally designing systems, technology, procedures, and policies that lead to the fair and just distribution of benefits in the energy system.”

PNNL: Review of Energy Equity Metrics – Oct 2021

Affirming equity in all aspects of the energy system is key to building a just and clean energy system and is increasingly being identified as a key policy goal by legislatures around the country. Many PUCs, utilities and stakeholders are making strides in addressing energy equity by developing procedural metrics to ensure participation by target populations (e.g., marginalized communities) in program design, delivery and decision making, and setting goals to increase program participation and reduce energy burden for target populations. These efforts are critical to addressing key aspects of energy equity. However, more work is needed to explicitly measure the distributional impacts of DER programs i.e., will program benefits be distributed equitably across all customers, including target populations?

Benefit-cost analysis is used to measure the utility system, host customer, and societal costs[1] and benefits of a DER program or policy on average across the utility system, typically expressed as monetized impacts or benefit-cost ratios (BCR). BCA can incorporate some aspects of energy equity, primarily in cases where a program is designed, implemented and evaluated for a specific target population (e.g., limited income, an EJ community program, etc.). In these cases, both energy and non-energy benefits to host customers can be assessed, or in some cases alternative BC ratio thresholds can be used (e.g., < 1.0). Additionally, transgenerational equity can be captured by using low discount rates (e.g., 2-3%) to calculate the net present value of the impacts: where a greater value is placed on the impacts of DER investments in the long-term versus the short-term. But these aspects of BCA do not fully address the distribution of benefits and costs to target populations.

To address distributional impacts, we offer the conceptual framework in the figure below, where distributional equity analyses (DEA) are conducted alongside BCAs when evaluating programs and policies. This is in addition to, but separate from, addressing procedural and structural energy equity metrics. DEAs can help determine if program benefits will be distributed equitably to target populations, where metrics can include:

  • Rate (¢/kwh) and bill ($/month) impacts;
  • Participation rates (% eligible) in programs;
  • Energy burden (% of income spent on energy bills)
  • Impacts on health & safety, economic development (job-years), reliability (CEMI – Customers Experiencing Multiple Interruptions), resilience (customer outages, restoration time, etc.); and
  • Environmental /health and other impacts in specific locations / geographic areas.

NESP is still refining this framework, but we believe it will help provide jurisdictions with a path to explicitly measure and include distributional equity in decision making. Questions and challenges remain regarding the framework’s use, including:

  • Is distributional equity analysis a part of a broader BCA, or is it a distinct analysis?
  • How should distributional equity analysis results be presented? How should stakeholders use distributional equity analysis results in decision making?
  • What customer data must utilities collect in order to conduct a distributional equity analysis, and what challenges are there to collecting this data?

As NESP drafts guidance on this topic, we will continue to collaborate with and seek input from our peers in this space, including key work from the following organizations/companies:

In the meantime, we welcome your thoughts and feedback on this conceptual framework and invite your comments at nspm@nationalenergyscreeningproject.org

See the entire February 2022 NESP Quarterly.


[1] The extent to which a jurisdiction accounts for host customer and/or societal impacts should depend on the applicable policies in the jurisdiction – consistent with NSPM Principle #2 – and applies to accounting for energy equity in regulatory decisions regarding resource investments.

What’s in Store for 2022?

What’s in Store for 2022?

(NESP Quarterly February 14, 2022) — This year is off to a busy start! New publications are coming soon, we are providing technical assistance to states applying the NSPM, and we’re gearing up to expand the NSPM to address key topics including guidance on accounting for energy equity.

Companion Resources to the NSPM

In our October NESP Quarterly (pg. 6), we shared a flavor of two forthcoming NESP publications:

Methods Tools Resources handbook cover
  • Methods, Tools & Resources: A Handbook for Quantifying Distributed Energy Resource Impacts for Benefit-Cost Analysis; and
  • Benefit-Cost Analysis Case Studies – Examples of Distributed Energy Resource Use Cases

While we hoped to publish by now, they are expected in March 2022. These companion documents to the NSPM for DERs will further help guide jurisdictions in their BCA efforts.

The 200+ page Methods, Tools & Resources (a.k.a. “MTR Handbook”) provides a wealth of technical information on how to quantify the full range of utility system and non-utility system impacts of DER investments, with links to resources and tools. Once a jurisdiction applies the NSPM BCA framework to develop or update its primary cost-effectiveness test, the MTR Handbook can guide decisions on what methods to use to quantify the relevant impacts in the jurisdiction’s BCA test.

The BCA Case Studies take the theoretical to application. Informed by real-world use cases but generalized into illustrative examples, they demonstrate applying the NSPM to specific DER technologies and programs of growing interest: residential EV managed charging, commercial combined solar and storage dispatch, and residential grid-interactive and efficient building (GEB) retrofits. The three case studies highlight different jurisdiction-specific tests (JSTs) based on policy objectives for three hypothetical jurisdictions. Each illustrates key BCA considerations for either single or multi-DER use cases and demonstrates different approaches to account for impacts when certain data may be unavailable.

State Technical Assistance in Applying the NSPM

We are providing technical assistance to commissions in applying the NSPM framework. Assistance is in the context of updating BCA practices for DER programs, procurement, and/or broader planning efforts. With support from U.S. DOE via Lawrence Berkeley National Laboratory, we will provide technical assistance throughout the year to select states, budget permitting. If your jurisdiction is interested in such services, please contact NSPM@nationalenergyscreeningproject.org.

Expanding NSPM Guidance

Based on 2021 experience with NSPM application, we are prioritizing areas where additional guidance is warranted to help jurisdictions with BCA practices, such as:

  • Accounting for energy equity in the context of benefit-cost analyses (BCAs), including developing the concept of a separate but complementary distributional equity analysis.
  • Applying the principles and concepts of the NSPM to a range of regulatory settings, including distribution system planning, integrated resource planning, grid modernization, time-of-use rates, and more.
  • Use of discount rates in BCAs, including whether and how to use different rates for different BCA tests and across BCA assumptions (e.g., for the social cost of carbon versus other costs or benefits), and use of nominal vs real rates, etc.
  • How to treat offsetting impacts (i.e., transfer payments), especially in context of tax incentives.
  • Treatment of other fuel impacts to consider in BCA, which is particularly relevant and important for electrification measures, programs and strategies.

These updates/expansions to the NSPM are slated for later 2022.

See the entire February 2022 NESP Quarterly.