ll ll I Ill I ll ll I ll Item Number: 19

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1 Control Number: ll ll I Ill I ll ll I ll Item Number: 19 Addendum StartPage: 0

2 Project No Annual Energy Efficiency I To The Public Utility Commission of Texas In Accordance With Substantive Rule Q (h)(l) I TXU ELECTRIC I DELIVERYCOMPANY I I I April 1,2007 1

3 TXU ELECTRIC DELIVERY COMPANY ANNUAL ENERGY EFFICIENCY PLAN 1. INTRODUCTION... 1 I1. EEP ORGANIZATION EXECUTIVE SUMMARY... 2 IV. OBJECTIVES AND APPROACHES... 4 V. ENERGY EFFICIENCY GOALS AND BUDGETS... 4 A. Projected Demand Goals and Energy Savings Customer Classes... 6 VI. C. Budget Allocations... 6 GENERAL IMPLEMENTATION PLAN... 7 A. Program Design Existing DSM Contracts... 8 VI1. C. Program Implementation... 9 PILOT PROGRAMS... 9 VIII. APPENDICES Appendix A Savings Goals and Budget Projections Appendix B Existing DSM Contracts i 2

4 1. INTRODUCTION TXU Electric Delivery Company (Electric Delivery) presents this Energy Efficiency Plan (EEP) as required by Substantive Rule $ and , which are Energy Efficiency Rules (EE Rules) implementing Public Utility Regulatory Act (PURA) This EEP outlines Electric Delivery s plans to achieve a minimum of 10% reduction in its annual system demand growth by January 1, 2008, and each year thereafter as required by PURA , and to meet the requirements of the EE Rules. This EEP covers a four-year period beginning January 1, 2007 and ending December 31, 2010, and presents annual projected demand goals and energy savings, budgets, and program implementation plans for that period. The budgets and implementation plans that are included in this EEP are highly influenced by requirements of the EE Rules and lessons learned regarding energy efficiency service provider and customer participation in the various energy efficiency programs. II. EEP ORGANIZATION This EEP consists of seven main sections and two appendices. Section 111 provides an Executive Summary that summarizes Electric Delivery s plan to meet the requirements of PURA and the EE Rules and establishes the direction for near-term activities. A summary overview of the estimated savings goals and budgets is also provided in this section. Section IV describes Electric Delivery s objectives and approach in administrating energy efficiency programs to achieve the goals outlined in PURA and the EE Rules. Section V presents estimated savings goals and budgets for 2007 through Section VI describes Electric Delivery s general implementation plan for meeting the requirements of PURA and the EE Rules, including a description of pre-program and program activities. Section VI1 describes Electric Delivery s plans for implementing new Pilot Programs in accordance with Senate Bill 712 (SB712) and the Pilot Program Template adopted by the Texas Public Utility Commission in November Appendix A includes documentation for projected savings goals and budgets estimated to meet the requirements of PURA and Substantive Rule Appendix B includes a description of Electric Delivery s existing DSM contracts and obligations. 1 3

5 PURA requires that each investor owned electric utility achieve a minimum of 10% reduction of its annual growth in system demand by January 1, 2004, anc! ezch year thereafter, through market-based standard offer programs ( SOPS ) and limited, targeted market transformation programs ( MTPs ). The EE Rules include specific requirements related to the implementation of SOPs and MTPs by investor-owned electric utilities that control the manner in which investor-owned electric utilities must administer their portfolio of energy efficiency programs in order to achieve their mandated energy efficiency goal. Electric Delivery s EEP is intended to enable the Company to meet its statutory goal through implementation of energy efficiency programs in a manner that complies with PURA and the EE Rules. The projected annual demand growth, energy efficiency goals, projected energy savings, and projected budgets related to Electric Delivery s energy efficiency program for the years 2007 through 2010 are shown below. More detailed information concerning the calculation of Electric Delivery s energy efficiency goals is included in Section V of this EEP. Projected Energy Energy Efficiency Annual Growth Efficiency Projected kwh in Demand kw Goal Savings Year (kw at meter) (at meter) (at meter) , , ,731, , , ,731, , , ,731, , , ,731,766 Total Projected Budget * $57,128,698 $54,171,395 $52,016,358 $50,545,166 Large Commercial & Industrial SOP Residential & Small Commercial SOP. Hard-to-Reach SOP (also known as Low-Income Weatherization SOP) Emergency Load Management SOP 2 4

6 . Energy Homes MTP. Commercial Air Conditioning Distributor MTP. Air Conditioning Installer Information & Training MTP m Texas SCORE Pilot MTP Citysmart Pilot MTP. CCET Residential Demand Response Pilot MTP Air Conditioning Tune-up Pilot MTP m Refrigerator Recycling Pilot MTP Program budgets for 2007 through are summarized in Table 2 below. More detailed information concerning these budgets can be found in Section V and Appendix A of this EEP. Conditioning Distributor MTP Air Conditioning Installer Information & Training MTP TexasSCoRE Pilot MTP CitySmart Pilot MTP CCET Residential Demand Response Pilot MTP Air Conditioning Tune-up Pilot MTP Refrigerator Recycling Pilot MTP $ 1,444,103 $ 1,444,103 $ 1,444,103 $ 1,444,103 $ 3,111,116 $ 3,111,116 $ 3,111,116 $ 3,111,116 $ 878,468 $ 878,468 $ 878,468 $ 878,468 $ 422,222 $ 422,222 $ 422,222 $ 422,222, $ 222,407 $ 222,407 $ 222,407 $ 222,407 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,000 $ 200,

7 This EEP translates the requirements of PURA $ and the EE Rules into plans and procedures that are intended to allow Electric Delivery to meet or exceed its mandated energy efficiency goaf In a manner that complies with PURA $ and the EE Rules. In preparing this EEP, Electric Delivery has taken the approaches discussed below to establish a strategy for achieving the energy efficiency goal. These approaches are consistent with PURA $ and the EE Rules. 1. Electric Delivery plans to implement Commission-approved programs that target both broad market segments and specific market sub-segments that offer significant opportunities for cost-effective savings. Electric Delivery anticipates that targeted outreach to a broad range of service providers and market segments will be necessary in order to meet the energy efficiency goals required by PURA $ and the EE Rules on a continuing basis. 2. Electric Delivery has projected annual program expenditures that will be required to meet the requirements of PURA and Substantive Rule $ through the year However, actual program costs may be higher or lower than costs projected in this EEP because of the difficulty in predicting the response of energy efficiency service providers and customers to program offerings. Several factors related to program design and incentive levels will influence service provider participation rates, and those factors are in large part dictated by the EE Rules, rather than Electric Delivery. If certain programs are not fully subscribed during a program year or service providers are not achieving projected savings in a particular program, Electric Delivery may reallocate funding budgeted for those programs to other programs that have a higher probability of success. 3. Electric Delivery developed the annual budgets for 2007 through 2010 based on the requirement in Substantive Rule (f)(2) that demand goals be reset annually based on demand growth from the five years preceding a program year. Demand goals for 2008 through 2010, and the budgets necessary to meet such goals, will be revised in future EEPs as actual, historical demand growth used in subsequent demand growth calculations will almost surely be different from historical demand growth in prior years. V. ENERGY EFFICIENCY GOALS AND BUDGETS The following sections present projected energy efficiency goals and budgets associated with meeting the requirements of PURA $ and Substantive Rule The budget allocations presented below are based directly on the energy efficiency goals, avoided costs, and incentive caps included in Substantive Rule $ These budgets set forth the total anticipated cost associated with meeting energy efficiency goals and do not reflect the lead-time that actually exists between budgeting for program spending and crediting demand savings towards the goal. Project level goals take into account transmission and distribution line losses. Incentive budgets are based upon demand and energy savings at the customer meter. 4 6

8 Table 1 in the Executive Summary presents projected demand goals and energy savings to be achieved by Electric Delivery in the years 2007 through Projected annual growth in demafiu was calculated based on the average of the most recent five annual growth rates ( ), adjusted for weather fluctuations, in accordance with Substantive Rule (f)(2). Table 2 in the Executive Summary presents projected program budgets for the years 2007 through Supporting documentation for the calculation of values presented in Tables 1 and 2 are included in Appendix A. The demand (kw) goal and energy (kwh) savings shown in Table 1 include the % environmental adder authorized in Electric Delivery s Unbundled Cost of Service case (PUC Docket No ). Historically, the projected Electric Delivery demand goals were derived using the following formula: Annual projected growth in system demand times the 10% mandated reduction in growth times 1 minus the 7% line loss factor to reflect a metered demand goal times the environmental adder. 2007: (717,000 kw x.10 x (1-.07) x ) = 75,466 kw 2008: (717,000 kw x.10 x (1-.07) x ) = 75,466 kw 2009: (717,000 kw x.10 x (1-.07) x ) = 75,466 kw 2010: (717,000 kw x.10 x (1-.07) x ) = 75,466 kw In determining the projected demand goals for 2007 through 2010, this calculation was used as a starting point. However, due to the uncertainty of the effect ERCOT s load management program will have on participation in Electric Delivery s Emergency Load Management SOP, the extent to which the Environmental Protection Agency s more stringent qualification requirements will decrease participation in the Energy Star@ Home MTP, and with approximately $1 4.5 million in unexpended energy efficiency funding being rolled over into 2007, Electric Delivery is increasing the annual goal to 104,075 kw. The projected Electric Delivery energy savings (kwh) for existing programs were derived by applying an average conservation load factor to the individual program kw projections for each year. The conversation load factor is determined by multiplying the actual kw saved (per program) by 8,760 (hours in a year) and dividing that number into the kwh saved for the same time period. Prior year s actual conservation load factors are averaged by program to determine the factor to use in current program projections. This factor is multiplied by the projected kw times 8,760 to arrive at the projected energy savings for each program. Since the four new pilot programs have no history, their energy savings were estimated based on industry knowledge. The sum of the individual program energy savings is equal to Electric Delivery s projected annual energy savings. 5 7

9 B. CUSTOMER CLASSES Customer classes targeted by Electric Delivery s energy efficiency programs are the Hard-to-Reach, Residential & Small Commercial, and Large Commercial & Industrial customer classes. In determining the allocation of budget dollars among the Residential & Small Commercial and Large Commercial & Industrial customer classes, Electric Delivery examined historical program results and economic trends while taking into account Substantive Rule (h)(2)(G), which states that no less than 5% of the utility s total demand reduction goal should be achieved through programs for hard-to-reach customers. Based on this process, the following allocation is being used for the years 2007 through C. BUDGET ALLOCATIONS Energy Efficiency Savings Hard-to-Reach: 11% Residential & Small Commercial: 37% Large Commercial & Industrial: 52% Table 3 presents total estimated budget allocations required to meet demand goals and energy savings through The budget for the Large Commercial & Industrial class includes costs for SOPS as well as existing demand-side management ( DSM ) contracts. The budget allocations are defined by the overall demand and energy savings presented above, avoided costs, allocation of demand goals among customer classes, and the incentive caps by customer class required by Substantive Rule , and projected costs for existing DSM contracts. The budget allocations presented in Table 3 are broken out by customer class and subdivided into costs for Electric Delivery administration and incentive payments, and are further detailed in Appendix A. Electric Delivery has created a separate budgeting category for each group of customers having unique budget caps and requirements under Substantive Rule While Electric Delivery has estimated budgets by customer class, Electric Delivery plans to track and report budgets by program, since individual programs may serve multiple customer classes. Program descriptions, budgets, and a description of customer classes targeted by Electric Delivery s planned program offerings are included in Appendix A. 6 8

10 Year o08 Total Electric Delivery Incentive Customer Class Program Administration Payment Budget Budget Budget Large Commercial & Industrial $ 17,342,654 $1,734,265 $ 15,608,389 Res & Small Comm $ 15,548,276 $ 1,554,828 $ 13,993,448 Hard-to-Reach $ 12,387,100 $1,238,710 $ 11,148,390 Total $45,278,030 $4,527,803 $ 40,750,227 Large Commercial & $ 18,177,507 ' Industrial $1,817,751 $ 16,359,756 Res & Small Comm $ 15,548,276 $1,554,828 $ 13,993,448 Hard-to-Reach $ 12,387,100 $1,238,710 $ 11,148,390 Total $46,112,883 $4,611,289 ~ $ 41,501,594 VI. GENERAL IMPLEMENTATION PLAN Electric Delivery's general implementation plan includes two components: 1. Implement seven Commission-approved energy efficiency programs and five pilot programs in 2007 and, based on 2007 results, evaluate their potential for 2008 and beyond. 2. Continue operation of existing DSM contracts through Each component of this plan is discussed in the following subsections. A. PROGRAM DESIGN Electric Delivery plans to implement seven program design templates that were developed through the Energy Efficiency Implementation Docket and are included in Substantive Rule and five pilot programs which are discussed in more detail in Section VII. These programs target both broad market segments and specific market sub-segments that offer significant opportunities for cost-effective savings. Electric Delivery anticipates that targeted outreach to a broad range of service provider types will be necessary in order to 7 9

11 ~ using meet the savings goals required by PURA on a continuing basis. Table 4 below summarizes the programs and target markets. I Program Large Commercial & Industrial SOP Residential & Small Commercial SOP Hard-to-Reach SOP 1 Emergency Load Management SOP Energy Star@ Homes MTP Commercial Air Conditioning Distributor Air Conditioning Installer Information and Training MTP Texas SCORE Pilot MTP CitySmart Pilot MTP CCET Residential Demand Response Pilot MTP Air Conditioning Tune-up Pilot MTP Refirgerator Recycling Pilot MTP Target Market Large commercial and industrial new and/or retrofit market using wide range of measures Residential and small commercial retrofit market wide range of measures Hard-to-reach residential new and/or retrofit market using wide range of measures 1 Large commercial and industrial load control activities Residential new construction market using wide range of measures Small commercial new construction and replacement market for air conditioning units from 5.5 to 20 tons in size Encourages improved installation practices for HVAC equipment and ductwork in the residential market Encourages improved energy efficiency and demand reduction solutions for K-12 public schools Encourages improved energy efficiency and demand reduction solutions for city governmen& Residential demand response program focused on exploring demand response capabilities and increasing energy efficiency as a means to lessen resource adequacy concerns Encourages improved energy efficiency in HVAC equipment through prescribed tune-up procedures for residential and small commercial customers Targets the removal and safe disposal of old, inefficient refrigerators and freezers from households to reduce energy demand and protect the environment B. EXISTING DSM CONTRACTS Substantive Rule (h)(2)(b) provides that [olnly additional energy and peak demand savings achieved as a result of projects installed after the effective date of this section may count towards the amount of energy and peak demand savings actually achieved on an annual basis. There will be no new projects a 10

12 installed under these existing DSM contracts as of January 1, 2006 forward and, thus, there will be no additional savings reported from the existing DSM contracts, although the contracts will require payments through A description of each existing DSM contract, including information about the type and duration of the energy efficiency project(s) implemented pursuant to ths contract and the customer class that the project(s) serves, is included in Appendix B. C. PROGRAM IMPLEMENTATION Electric Delivery began implementation of most of the programs in its current Program Portfolio in last quarter of 2006 and the first quarter of The Emergency Load Management SOP, the Air Conditioning Tune UP Pilot MTP, the Refrigerator Recycling Pilot MTP, and the CCET Demand Response Pilot MTP are expected to kick-off in the second quarter of Electric Delivery plans to conduct ongoing information activities to encourage participation in these SOPS and MTPs. For each program, potential participants will be identified. Program information will then be tailored to the types of participants, but at a minimum will include a program website, brochures, and an introductory meeting to explain the program prior to the program start-date. Furthermore, Electric Delivery plans to participate in trade shows and conferences to provide information related to its Energy Efficiency Program. Notice of the meetings, trade shows and conferences will be posted on Electric Delivery s Energy Efficiency Program website. Once a program has been initiated, Electric Delivery plans to offer the program on a continuous first-come, first-served basis, until new program priorities are identified. Electric Delivery believes that it is important to maintain program availability to encourage energy efficiency service provider participation. VII. PILOT PROGRAMS Consistent with SB712, which was passed by the Texas Legislature in 2005, and the Pilot Program Template adopted by the Public Utility Commission of Texas h November 2005, Electric Delivery has chosen to offer the following pilot programs in its service territory in Texas SCORE Pilot MTP Electric Delivery recognizes that public school districts in Texas are experiencing the burden of high energy costs now more than ever. While energy costs have historically accounted for only about 3% of Texas school districts total budgets, those costs have now soared into the 5 to 6% range. Further, a majority of school districts lack the technical knowledge, first-hand experience, and management decision-making processes that are necessary for identifying, prioritizing, and completing projects that will improve their schools energy performance and reduce operating costs. 9 11

13 Taraet Audience There are in excess of 350 Independent School Districts (ISDs) within Electric Delivery s service territory. The largest of these ISDs has a student enrollment of almost 160,000, while the smallest districts have student enrollments of less then i,006. The 2007 Texas SCORE Pilot MTP will secure the participation of twelve to fifteen of these K-12 public school districts. Marketing and outreach efforts will be conducted for fifteen to twenty districts. To ensure that a diverse and representative cross-section of school districts participate, the program sought to work with districts of varying sizes and in multiple locations. The pilot program has purposely limited the number of districts in order to more closely evaluate the program s success. This pilot program intends to facilitate the examination of actual demand and energy savings, operating characteristics, program design, and overall acceptance by the targeted school districts in an effort to better design a successful, on-going Energy Smart Schools Market Transformation Program. Non-Utilitv SDonsors/Particioants This pilot program seeks to leverage existing federal, state, and local initiatives targeting improved energy efficiency in schools and buildings. Participants and supporters of this program include the Texas State Energy Conservation Off ice (SECO), DOE S Rebuild America Program, ENERGY STAR Buildings Program, the Texas General Land Office, the Energy Services Coalition, as well as multiple engineering, architectural, and auditing firms. Leveraging several SECO resources in particular is proving to be especially helpful: free preliminary energy assessments to school districts, low-interest loan funds for energy efficiency improvements in the LoanSTAR Program, and curriculum/training for teachers to educate students about energy efficiency and conservation. This pilot program also is communicating with regional consumer and environmental groups to obtain suggestions for making improvements to the program s overall design and strategy in order to achieve greater success. Enerav Savinas The estimated energy savings to be achieved by Electric Delivery s 2007 Texas SCORE Pilot MTP is 3 MW of peak load reduction and 2,906,308 kwh in annual energy use reduction (see Appendix A). Proaram Desian The program design characteristics being studied in the Texas SCORE Pilot MTP are: 1) the decision-making processes among school districts relative to energy efficiency; 2) the role of monetary and non-monetary incentives in encouraging energy efficiency investment; 3) whether changing the program name improves participation, enthusiasm, and results; 4) how effective the integration of state and federal programs that focus on energy efficiency (the Texas State Energy Conservation Office programs, DOE S Energy Smart Schools program, etc) are with the Electric Delivery pilot program; 5) the role of 10 12

14 benchmarking school districts building energy performance and management decision-making processes; 6) how energy efficiency projects in schools will be funded; and 7) the effects of a third-party facilitator on the successful implementation of energy efficiency measures. Research Plan The Texas SCORE Pilot MTP is gathering a substantial amount of information during implementation for the purposes of determining; 1) the total opportunity for energy efficiency among k-12 schools; 2) energy use benchmarking information for the Electric Delivery service territory schools for comparison with other schools in their region, the state and nationwide; 3) the pace at which the program is able to influence energy efficiency investment actions by the school districts; 4) what the key determinants are for energy efficiency investment decisions; 5) the funding mechanisms that school districts employ for implementing energy efficiency projects; and 6) the metrics for efficiency projects (dollars saved, technologies installed, peak kw and kwh reduction, installation time, etc). The program includes benchmarking participating schools energy performance with various metrics so that the school decision-makers can better understand how their facilities compare to other schools with similar characteristics. In addition, the program also assists the participating school districts in benchmarking their management decision-making processes against best practices, and helps them prioritize those actions they can take to improve their energy performance. Program results (kw demand and kwh energy reductions achieved) will be measured by deemed savings for individual measures or by auditing the facilities for exact savings achieved. Strict quality assurance and measurement and verification requirements will be included in this program, including preinspections for all equipment being replaced, and post-inspections for all new equipment installed. Consistent with Electric Delivery s Large Commercial and Industrial Standard Offer Program (Cat SOP), this pilot program requires detailed, accurate documentation outlining what technologies and how many pieces of equipment are being replaced, as well as the same detailed information for the new equipment being installed. Electric Delivery engages in appropriate measurement and verification protocols, obtains detailed energy efficiency measure descriptions and documents all serial numbers and model numbers of HVAC equipment that participates in this program to ensure that incentives are not being paid for the same piece of equipment in more than one Electric Delivery energy efficiency program. Proaram Budaet Electric Delivery s energy efficiency budget for the 2007 program year is $57,128,698. These budget dollars have been allocated among the programs offered in each customer class

15 The budget for the Texas SCORE Pilot MTP for 2007 is $878,468 (see Appendix A). This money is being split between program support (provided by CLEAResult, Inc.) and payment of incentives for viable energy-saving measures undertaken by participating school districts. The funding for the 2007 pilot program has been reallocated from the C&l SOP budget for The C&l SOP budget was reduced by the amount needed to fund the Texas SCORE Pilot MTP. Proaram Timeline The 2007 Texas SCORE Pilot MTP began in October 2006 and will continue through December 31, The program includes tracking the number of meetings, training sessions, and the kw demand and kwh energy savings for each project, reported to the utility on a monthly basis. The first two to three months of the program focused on recruiting school districts, securing their commitment to participate, and beginning to benchmark their energy performance and management practices. The next three to four months involve completing the benchmarking processes, identifying projects, and assisting the districts in taking the necessary steps to undertake those projects (securing approvals, funding, contractors). The late summer through the fall will primarily involve conducting post-inspections on completed projects, calculating energy savings achieved, and determining and paying incentive payments to the school districts. In this timeframe, Electric Delivery will also be examining the results of the program to determine whether to continue offering the program. Impact on Other Proarams The only Electric Delivery program that has been affected by this pilot program is the C&l SOP. Electric Delivery will continue to offer the C&l SOP as an energy eff iciency/demand-side management program. In the past, school districts were eligible to participate in the C&l SOP, and are still currently eligible; however, school districts participation has been quite small. Offering the Texas SCORE Pilot Program in 2007 is an effort to further encourage the participation of this market segment in energy efficiency programs, and to assist the participating districts in improving their energy performance and reducing operating costs. The reduction in available incentive dollars for the C&l SOP reduced the potential energy savings under the C&l SOP. However, the transferred budget money has been dedicated to encouraging energy savings at public school districts in the Electric Delivery service territory. The C&l SOP will continue with a remaining 2007 budget of $1 0,874,167. CitySmart Pilot MTP Electric Delivery will offer a pilot Energy Smart Cities Program (referred to as Citysmart) in its service territory in Electric Delivery recognizes that city governments in Texas are experiencing the burden of high energy costs now 12 14

16 more than ever. The program will help cities with energy costs that have soared into the 5 to 6% range of their total budgets. Further, a majority of cities lack the technical knowledge, first-hand experience, and management decision-making processes that are necessary for identifying, prioritizing, and completing projects that will improve their ciiies energy performance and reduce operating costs. Tarqet Audience Electric Delivery serves over 400 municipalities within our service territory. The largest of these have populations of over 1,000,000, while the smallest have less than 1,000. The 2007 Electric Delivery pilot program for Cities has set a goal for participation of three to five cities. To ensure that a diverse and representative cross-section of city governments participate, the program will seek to work with cities of varying sizes and in multiple locations. The pilot program has purposely limited the number of cities in order to more closely evaluate the program s success. This pilot program intends to facilitate the examination of actual demand and energy savings, operating characteristics, program design, and overall acceptance by the targeted cities in an effort to better design a successful, ongoing Citysmart MTP. Non-Utilitv SDonsors/ParticiDants This pilot program seeks to leverage existing federal, state, and local initiatives targeting improved energy efficiency in cities and buildings as much as possible. Participants and supporters of this program include the Texas State Energy Conservation Office (SECO), DOE S Rebuild America Program, ENERGY STAR Buildings Program, the Texas General Land Office, the Energy Services Coalition, as well as multiple engineering, architectural, and auditing firms. This pilot program also is communicating with regional consumer and environmental groups to obtain suggestions for making improvements to the program s overall design and strategy in order to achieve greater success. Enerav Savinas The estimated energy savings to be achieved by Electric Delivery s 2007 Citysmart Pilot MTP is 1.O MW of peak load reduction and 2,692,816 kwh in annual energy use reduction (see Appendix A). Proaram Desian The program design characteristics being studied in the Citysmart Pilot MTP are: 1) the decision-making processes among cities relative to energy efficiency; 2) the role of monetary and non-monetary incentives in encouraging energy efficiency investment; 3) how effective the integration of state and federal programs that focus on energy efficiency (the Texas State Energy Conservation Office programs, etc) are with Electric Delivery s pilot program; 4) the role of benchmarking cities building energy performance and management decisionmaking processes; 5) how energy efficiency projects in cities will be funded; and 13 15

17 6) the effects of a third-party facilitator on the successful implementation of energy efficiency measures. Research Plan The CitySmart MTP will gather a substantial amount of information during implementation for the purposes of determining; 1) the total opportunity for energy efficiency among municipalities; 2) energy use benchmarking information for the Electric Delivery service territory cities for comparison with other cities in the state and nationwide; 3) the pace at which the program is able to influence energy efficiency investment actions by the city; 4) what the key determinants are for energy efficiency investment decisions; 5) the funding mechanisms that cities employ for implementing energy efficiency projects; and 6) the metrics for efficiency projects (dollars saved, technologies installed, peak kw and kwh reduction, installation time, etc). The program includes benchmarking participating cities energy performance with various metrics so that the city decision-makers can better understand how their facilities compare to other cities with similar characteristics. In addition, the program also assists the participating cities in benchmarking their management decision-making processes against best practices, and helps them prioritize those actions they can take to improve their energy performance. Program results (kw demand and kwh energy reductions achieved) will be measured by deemed savings for individual measures or by auditing the facilities for exact savings achieved. Strict quality assurance and measurement and verification requirements will be included in this program, including preinspections for all equipment being replaced, and post-inspections for all new equipment installed, Consistent with Electric Delivery s Large Commercial and Industrial SOP (C&l SOP), this pilot program requires detailed, accurate documentation outlining what technologies and how many pieces of equipment are being replaced, as well as the same detailed information for the new equipment being installed. Electric Delivery engages in appropriate measurement and verification protocols, obtains detailed energy efficiency measure descriptions and documents all serial numbers and model numbers of HVAC equipment that participates in this program to ensure that incentives are not being paid for the same piece of equipment in more than one Electric Delivery energy efficiency program. Proaram Budaet Electric Delivery s energy efficiency budget for the 2007 program year is $57,128,698. These budget dollars have been allocated among the programs offered in each customer class. The budget for the Citysmart Pilot MTP for 2007 is $422,222 (see Appendix A). This money is being split between program support (provided by CLEAResult, Inc.) and payment of incentives for viable energy-saving measures undertaken by participating cities

18 The funding for the 2007 Citysmart Pilot MTP has been reallocated from the C&l SOP budget for The C&l SOP budget was reduced by the amount needed to fund this program. Proaram Timeline The 2007 CitySmart Pilot MTP began in February 2007 and will continue through December 31, The program includes tracking the number of meetings, training sessions, and the kw demand and kwh energy savings for each project. The first two to three months of the program will focus on recruiting city governments, securing their commitment to participate, and beginning to benchmark their energy performance and management practices. The next three to four months involve completing the benchmarking processes, identifying projects, and assisting the cities in taking the necessary steps to undertake those projects (securing approvals, funding, contractors). The late summer through the fall will primarily involve conducting post-inspections on completed projects, calculating energy savings achieved, and determining and paying incentive payments to the cities. In this timeframe, Electric Delivery will also be examining the results of the program to determine whether to continue offering the program in future years. Impact on Other Proarams The only Electric Delivery program that has been affected by this pilot program is the C&l SOP. Electric Delivery will continue to offer the C&l SOP as an energy efficiency/demand-side management program. In the past, cities were eligible to participate in the C&l SOP, and are still currently eligible; however, cities participation as a whole has been quite small. Offering this CitySmart Pilot MTP in 2007 is an effort to further encourage the participation of this market segment in energy efficiency programs, and to assist the participating cities in improving their energy performance and reducing operating costs. The reduction in available incentive dollars for the C&l SOP reduced the potential energy savings under the C&l SOP. However, the transferred budget money has been dedicated to encouraging energy savings at cities in the Electric Delivery service territory. The C&l SOP continues with a remaining 2006 budget of $1 0,874,167. CCET Residential Demand Response Pilot MTP Electric Delivery s Demand Response Pilot MTP is designed to be the preliminary testing grounds for new technologies being introduced to the ERCOT market as a result of the Advanced Metering rulemaking and a renewed focus on exploring demand response capabilities and increasing energy efficiency as a means to lessen resource adequacy concerns. In this program, at least two retail electric providers (REPS) in the Electric Delivery service territory will recruit customers to participate, wherein a programmable communicating thermostat and direct control switches will be installed in the customer homes, equipped with 15 17

19 two-way communications capabilities through the advance metering infrastructure. The REPs would then have the ability to cycle customer air conditioning units and switch AC condensing units on and off during demand response events. The pilot may also evaluate the potential for including pool pumps and electric water heaters in a demand program. The pilot program is intended to: (1) demonstrate the usefulness of smaller scale residential demand response as a means to curtail peak demand, (2) test the abilities and effectiveness of Broadband over Power Line (BPL) communications in interactions with an Advanced Metering Infrastructure, (3) evaluate customer reactions and participation in a residential demand response program, (4) measure and verify demand and energy savings resulting from demand response events, and participation in general, (5) save participant customers money on electric bills, and, when implemented fully, save money for all ratepayers in avoided energy costs. Taraet Audience The pilot program will be operated in regions of the Electric Delivery service area where an advanced meter infrastructure is being deployed. The REPs involved in the project will each recruit 250 customers to participate in the pilot. These customers would serve as the functional target audience for the project. Non-utilitv SDonsors/ParticiDants Sponsor / Participant Electric Delivery customers with installed advanced meters REPs Texas A&M University I lnstaners Roles & Responsibilities Homes will be equipped with programmable communicating thermostats and direct control switches, and will participate in automated Direct Response (DR) events Recruit participant customers, coordinate with utilities to monitor response to DR events, provide customer service Audit the Monitoring and Verification activities and analysis, general monitoring of the progress of the pilot s many activities and outcomes, and written reporting to interested entities Provide technology such as programmable communicating thermostats and direct control switches Install and maintain systems, provide customer service Enerav Savinas Similar programs that have utilized communicating thermostats and direct control switches have achieved savings of between 1 kw and 3 kw per home. The pilot has a demand savings target of 643 kw. No energy savings have been estimated because they would occur during curtailed periods, and would be 16 18

20 dependent on the number of times the demand resources were called by the utility. Proaram Desian This program will be marketed to a limited number of customers in regions of the Electric Delivery service area where an advanced meter and BPL infrastructure is being deployed. It will include: Coordination between regulated utilities, REPs, and electric customers to provide demand response capabilities to the market. Recruiting / retaining participating customers Educating customers on the importance, benefits, and potential cost savings associated with demand response Data collection through BPL networks in an advanced metering infrastructure Reporting process Timing of the program implementation The participating REPs and their subcontractors will take responsibility to design and implement customer marketing and customer acquisition activities, as well as on-going customer care. Each REP may use the pilot to collect its own additional specific customer-related information. Both participating REPs will have to agree to a common list of questions to be asked of each customer and data to be gathered. This process will be coordinated by the Center for the Commercialization Electric Technologies (CCET). Research Plan Monitoring and verification of the load reduction achieved by different control strategiesexercised by the REPs will be the responsibility of the REPs and their contractors and confirmed by Electric Delivery. This function is normally expected to be part of the services offered by the demand response sponsors, who will be acting as general contractors for the project. REPs and their contractors will stagger some control events for testing purposes such that only a portion of the customers experience a control for a given period. Data will also be collected from a control group of non-participants. Retailers would be responsible for obtaining a Letter of Authorization from each customer recruited into their pilot program for access to and use of the data from the customer s meter or other appliances installed. This will eliminate any issues with regard to rights to the use of the data. Proaram Budaet Electric Delivery s energy efficiency budget for the 2007 program year is $57,128,698. These budget dollars have been allocated among the programs offered in each customer class

21 The budget for the CCET Residential Demand Response Pilot Program for 2007 is $222,407. The budget is split between program implementation and payment of incentives. Additional funds of $513,475 will be used to purchase equipment necessary to conduct the pilot and will come from the Research and Development budget. Proaram Timeline The CCET Residential Demand Response Pilot Program will begin in the 2nd quarter of 2007 and will continue through Depending upon results, the program may be extended in An analysis of the 2007 pilot program will be completed by December ImDact on Other Proararns Funding for the 2007 CCET Residential Demand Response Pilot Program implementation and incentives will be allocated from the existing Emergency Load Management Program. Additional funds for the purchase of necessary equipment to conduct the pilot will be allocated from Research and Development. No other existing energy efficiency SOP or MTP Program will be adversely affected. Air Conditioning Tune-up Pilot MTP Electric Delivery will offer an Air Conditioning Tune-up (AC Tune-up) Pilot MTP in its service territory in conjunction with the Air Conditioning Installer Information and Training MTP in A program implementer will target a select group of Air Conditioning (AC) Contractors to market the program to their customers. Participating AC Contractors will perform a prescribed set of tune-up procedures to maximize the efficiency of existing AC systems for a pre-determined number of residential customers. Pre and post tune-up data will be collected on each AC system to determine demand and energy savings impacts. A statistically significant sample of AC systems in the pilot will be tested by a non-participating AC Contractor to verify data reported in the program to be used in evaluating the cost-effectiveness of the program and develop the market potential of demand and energy savings from a fully implemented program. Taraet Audience The 2007 Electric Delivery Air Conditioning Tune-up Pilot MTP will be limited to 1,500 AC systems. The specific Electric Delivery service areas will be determined by the participating AC Contractors. Non-Utilitv SDonsors/ParticiDants The pilot program will utilize a proven third-party implementer to recruit and train a select group of AC Contractors in all aspects of the pilot program. Participating AC Contractors will market the program to their existing customers based on the energy costs savings and increased comfort levels in the home

22 Enerav Savinas Based on similar programs in California, the initial total program savings estimates for the 2007 pilot program year are.3 MW of peak load reduction and 985,490 kwh of annual energy use reduction. These estimates will be refined by the program verification process that will document actual savings and determine the persistence level of savings gained from tune-ups.. Proaram Desian The participating AC Contractors will be trained by the third-party implementer in all aspects of the pilot program, including the reporting of all required data for program analysis. Components of the pilot program will include a prescribed list of AC tune-up procedures that include verification of refrigerant charge, proper airflow, cleaning condenser coils, proper insulation of the suction line and educating customers on the importance of high performance AC installations promoted in the Electric Delivery Air Conditioning Installer Information and Training MTP for their consideration when electing to replace their existing AC system in the future. Research Plan An analysis of the pilot program will be conducted at the end of the year to determine any barriers to participation by AC contractors and customers, to verify demand and energy savings and determine the persistence level of savings gained from the tune-ups. Lessons learned from the pilot will be incorporated into the existing pilot to improve efficiencies and make the program more effective. If the initial pilot proves to be successful, the group of participating AC Contractors will be expanded in Proaram Budaet Electric Delivery s energy efficiency budget for the 2007 program year is $57,128,698. These budget dollars have been allocated among the programs offered in each customer class. The budget for the Air Conditioning Tune-up Pilot MTP for 2007 is $200,000. The budget is split between program implementation and payment of incentives to participating AC Contractors for qualified AC tune-ups. P roa ram Ti me li ne The 2007 Air Conditioning Tune-up Pilot Program will begin in the second quarter of 2007 and will continue through December Based on the 2007 pilot evaluation and analysis, the program may be extended in 2008 with expanded AC Contractor participation. The first quarter of the 2007 program year will focus on finalizing program details and refining the implementation process. The second through the fourth quarters will consist of program implementation and the gathering of data for analysis. The analysis of the pilot will be completed in December 2007 with a final program summary report being submitted to Electric Delivery

23 ImDact on Other Proarams Funding for the 2007 Air Conditioning Tune-up Pilot Program will be allocated from the Air Conditioning Installer Information and Training MTP because both programs focus on the optimal operational efficiency of residential air conditioning systems. Refrigerator Recycling Pilot MTP Electric Delivery will offer a pilot Refrigerator Recycling Pilot MTP in its service territory in Many households have two or more refrigerators and/or freezers, with the secondary units being only partially utilized. The program will target the removal and safe disposal of old, inefficient refrigerators and freezers from households within the service territory to reduce energy demand and protect the environment. One barrier to disposing of the older refrigerators and freezers is the cost and availability of certified recycling companies. Federal law requires that all refrigerant be recovered prior to dismantling or disposal and universal waste (e.g., mercury), used oil, and PCBs be properly managed and stored. This program will provide an easy, cost effective and convenient method for homeowners to dispose of older, inefficient and partially utilized units. Taraet Audience The 2007 TXU Electric Delivery Refrigerator Recycling Pilot MTP will be limited to 1,000 residential refrigerators or freezers in the Round Rock and North Austin service areas. Participation will be limited to one unit per household in an effort to allow maximum participation. Non-Utilitv SDonsors/ParticiDants The pilot program will utilize a proven third-party implementer with appropriate licenses, certifications and facilities to meet Federal and local laws in the proper recycling and disposal of older refrigerators and freezers. The implementer will be encouraged to involve local community-based organizations that have the ability to create a call to action in addition to educating homeowners about the added costs of operating inefficient refrigerators and freezers. Enerav Savinas The estimated energy savings to be achieved by Electric Delivery s 2007 Refrigerator Recycling Pilot MTP is.3 MW of peak load reduction and 985,495 kwh annual energy use reduction. These estimates are based on the California Public Utility Commission s Database for Energy Efficiency Resources (DEER), which is used to document deemed energy savings values. Proaram Desian The program will be marketed to households in the pilot service areas focusing on the additional energy costs for secondary older, inefficient refrigerators and freezers, building consumer awareness of the program and the generation of requests for program services. Consumers will be given the option of scheduling 20 22

24 unit pick-ups by phone or on-line. A cash incentive will also be paid to the homeowner for the recycling and disposal of qualified refrigerators and freezers. Research Plan A summary analysis will be conducted at the end of the year that includes information on all activities conducted for the program. The analysis will include: number of requests for participation received by phone and on-line; number of cancellations received from consumers and a list of reasons reported for canceling; number of units removed from service; energy and demand reductions attributable to the program; and a summary of the quantities of materials processed as a result of the program. Consumer market barriers will be identified and a plan developed to overcome these barriers. Any negative consumer attitudes towards the program will be documented, marketing efforts will be evaluated, program design and delivery will be evaluated and strategies will be developed to overcome any negative perceptions of the program. Proclram Budaet Electric Delivery s energy efficiency budget for the 2007 program year is $57,128,698. These budget dollars have been allocated among the programs offered in each customer class. The budget for the Refrigerator Recycling Pilot MTP for 2007 is $200,000. The budget is being split between program implementation and payment of incentives for the recycling and disposal of qualified refrigerators and freezers in the pilot areas. Proqram Timeline The 2007 Refrigerator Recycling Pilot MTP will begin in the second quarter of 2007 and will continue through December Based on the 2007 pilot evaluation, the program may be extended in 2008 to additional areas within the service territory. The first quarter of the 2007 program year will focus on finalizing program details and refining the implementation process. The second through fourth quarters will consist of program implementation and the gathering of data for analysis. The analysis of the pilot will be completed in December 2007 with a final program summary report being submitted to Electric Delivery. ImDact on Other Proarams No Electric Delivery energy efficiency programs have been affected by this pilot program. Dollars were shifted from the Air Conditioning Distributor Market Transformation Program (AC Distributor MTP) to fund this program. New air conditioning standards took effect for the National Appliance Energy Conservation Act (NAECA) in January 2006 with increased standards for residential-sized equipment. The minimum standards increased from 10.0 SEER to 13.0 SEER. As a result of this, participation in the AC Distributor MTP for residential units of 65,000 BTUH and below was minimal because of smaller 21 23