STATE OF INDIANA INDIANA UTILITY REGULATORY COMMISSION

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1 STATE OF INDIANA INDIANA UTILITY REGULATORY COMMISSION PETITION OF NORTHERN INDIANA PUBLIC SERVICE COMPANY FOR APPROVAL OF ELECTRIC ENERGY EFFICIENCY PROGRAMS TO BE EFFECTIVE FOR THE PERIOD JANUARY, 06 THROUGH DECEMBER, 08, FOR AUTHORITY TO RECOVER ASSOCIATED STARTUP, IMPLEMENTATION AND ADMINISTRATIVE COSTS ALONG WITH COSTS ASSOCIATED WITH THE EVALUATION, MEASUREMENT AND VERIFICATION OF THOSE PROGRAMS ( PROGRAM COSTS ), LOST REVENUES AND PERFORMANCE INCENTIVES ( ENERGY EFFICIENCY PROGRAM COSTS ) THROUGH ITS DEMAND SIDE MANAGEMENT ADJUSTMENT MECHANISM IN ACCORDANCE WITH IND. CODE 8(a), 88.9 AND 88.0 AND PURSUANT TO 70 IAC 8, 70 IAC 86 AND 70 IAC 87 AND FOR AUTHORITY TO DEFER ENERGY EFFICIENCY PROGRAM COSTS. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CAUSE NO. 6 VERIFIED PETITION ( NIPSCO or Petitioner ) petitions the Indiana Utility Regulatory Commission ( Commission ) for approval of electric energy efficiency programs and authority to recover associated startup, implementation and administrative costs along with costs associated with the evaluation, measurement and verification ( EM&V ) of those programs ( Program Costs ), lost revenues and performance incentives (Program Costs, lost revenues

2 and performance incentives are referred to as Energy Efficiency Program Costs ) for the period January, 06 through December, 08 through its Rider 68 Adjustment of Charges for Demand Side Management Adjustment Mechanism ( DSMA Mechanism ) in accordance with Ind. Code 8(a), 88.9 and and 70 IAC 8, 86 and 87 and to defer Energy Efficiency Program Costs for future recovery. In accordance with 70 IAC.8 and.9 of the Commission s Rules of Practice and Procedure, NIPSCO respectfully submits the following information in support of this petition. NIPSCO s Corporate Status. NIPSCO is a public utility corporation organized and existing under the laws of the State of Indiana with its principal office and place of business at 80 East 86th Avenue, Merrillville, Indiana. NIPSCO renders electric and gas public utility service in the State of Indiana and owns, operates, manages and controls, among other things, plant and equipment within the State of Indiana used for the generation, transmission, distribution and furnishing of such service to the public. NIPSCO is a whollyowned subsidiary of NiSource Inc., an energy holding company whose stock is listed on the New York Stock Exchange. NIPSCO s Regulated Status. NIPSCO is a public utility within the meaning of Ind. Code 8 and as that term is used in Ind. Code 88. and an electricity supplier as that

3 term is used in Ind. Code 8.(b), 88.9 and NIPSCO is subject to the jurisdiction of this Commission in the manner and to the extent provided by the Public Service Commission Act, as amended, and other pertinent laws of the State of Indiana. NIPSCO s Operations. NIPSCO is authorized by the Commission to provide electric utility service to the public in all or part of Benton, Carroll, DeKalb, Elkhart, Fulton, Jasper, Kosciusko, LaGrange, Lake, LaPorte, Marshall, Newton, Noble, Porter, Pulaski, Saint Joseph, Stake, Steuben, Warren and White Counties in northern Indiana. Petitioner provides electric utility service to more than 68,000 residential, commercial, industrial, wholesale and other customers. NIPSCO s Current Electric DSM Program. NIPSCO s current electric demandside management ( DSM ) program is a portfolio of electric DSM and energy efficiency programs effective from January, 0 through December, 0 ( 0 Electric DSM Program ) approved in the Commission s November, 0 Order in Cause No. 96 (the 96 Order ) as follows: Residential Programs Residential Lighting Program Residential Elementary Education Program

4 Residential Low Income Weatherization Program Residential Home Energy Audit and Weatherization Program Residential Energy Efficiency Rebates Program Residential New Construction Program Residential Home Energy Conservation Program A/C Cycling Program (Residential and C&I) C&I Programs C&I Custom Program C&I Prescriptive Program C&I Small Business Direct Install Program School Audit Direct Install Program A/C Cycling Program (Residential and C&I) NIPSCO s Request for Approval. In this proceeding, NIPSCO requests Commission approval of its: () energy efficiency goals; () portfolio of electric energy efficiency programs to be effective for the period January, 06 through December, 08 and associated ratemaking and accounting mechanisms ( 0608 Electric EE Program ); () program budgets / costs; and () proposed EM&V. The 0608 Electric EE Program includes offerings to all customer classes, including low income customers, and provides for industrial customer opt out in accordance with Ind. Code

5 6. The following energy efficiency programs are included in the Electric EE Program: Residential Programs C&I Programs Residential Heating, Ventilation and Air Conditioning ( HVAC ) Program Residential Lighting Program Residential Appliance Recycling Program Income Qualified Appliance Replacement Program Home Energy Assessments Program School Education Program Behavioral Program Prescriptive Program Custom Program New Construction Program RetroCommissioning Program Small Business Direct Install Program

6 7. NIPSCO s proposed energy efficiency goals for the 0608 Electric EE Program is as follows: Residential Electric Gross kwh Savings Residential HVAC,6,000,707,000,87,000 Residential Lighting,9,000,8,000 0,0,000 Residential Other 9,0,000 8,97,000 8,87,000 C&I Electric Gross kwh Savings C&I HVAC,0,000,09,000,77,000 C&I Lighting,7,000,7,000,6,000 C&I Other 6,87,000 7,8,000 7,0,000 C&I Process,7,000,89,000 8,0,000 follows: 8. NIPSCO s proposed budget for the 0608 Electric EE Program is as Residential C&I Total Program Budget $9,6,6 $6,,07 $,88,0 Lost Revenues $9,8,6 $,7,7 $7,79,6 Performance Incentives $,69,07 $,77,0 $,68,7 Total Projected Expenditures $0,99,86 $7,86,06 $,886, NIPSCO also seeks authority, with the approval of its Oversight Board, to spend amounts that were previously approved by the Commission but not spent. 9. Consistent with the provisions of Ind. Code 88.9 and 88.0, 6

7 the 0608 Electric EE Program cost recovery proposal includes a request for accounting and ratemaking procedures to recover, through NIPSCO s DSMA Mechanism, all Program Costs (consistent with the provisions of 70 IAC 8), lost revenues (consistent with the provisions of 70 IAC 86) and performance incentives (consistent with the provisions of 70 IAC 87). NIPSCO's cost recovery proposal includes authority to recover lost revenues associated with the 0608 Electric EE Program, as well as lost revenues associated with previous programs years, including those lost revenues associated with prior programs that are not included in the 0608 Electric EE Program, through the DSMA Mechanism. 0. The 0608 Electric EE Program cost recovery proposal also includes a request to defer and recover the over and under recoveries of projected Energy Efficiency Program Costs through the DSMA Mechanism pending reconciliation in subsequent periods and approval to defer any Program Costs incurred in implementing the 0608 Electric EE Program prior to the time the Commission issues an order authorizing NIPSCO to recognize these costs through the ratemaking process. NIPSCO proposes to implement the cost recovery as part of its ongoing DSMA Mechanism reconciliation proceedings, docketed as Cause No. 68DSMX. NIPSCO's cost recovery proposal also includes authority to defer lost revenues for previous program years, including DSM and energy efficiency programs previously offered but subsequently discontinued, through the DSMA 7

8 Mechanism, until such amounts are recovered through rates.. The energy efficiency programs and associated accounting and ratemaking mechanisms reflected in the proposed 0608 Electric EE Program are in the public interest. Implementation of the 0608 Electric EE Program will promote efficiency in rendering and use of the retail energy services provided by NIPSCO.. The 0608 Electric EE Program contains programs considered in NIPSCO s most recent Integrated Resource Plan filed with the Commission on October, 0. NIPSCO s Request for Continued Approval of NIPSCO Oversight Board. Consistent with current practice, NIPSCO requests approval to continue to utilize its existing NIPSCO Oversight Board ( OSB ) to assist in the administration of the 0608 Electric EE Program. Specifically, once the Electric EE Program is approved by the Commission, the NIPSCO OSB will have the flexibility to shift costs within a program budget as needed, shift funds among programs so long as the overall 0608 Electric EE Program budget is not exceeded, and design and implement new programs as long as they pass the Total Resource Cost test and the overall 0608 Electric EE Program budget is not exceeded. 8

9 Petitioner s Request for Evaluation, Measurement and Verification. Consistent with current practice, NIPSCO requests to continue the same evaluation, measurement and verification program for its 0608 Electric EE Program, consistent with the provisions of 70 IAC 8 et seq. Petitioner s Proposed Reporting Requirements. To provide the Commission with the ability to monitor the progress of NIPSCO s 0608 Electric EE Program, NIPSCO proposes to file its annual EM&V results within 0 days of approval of the final EM&V report by its OSB. Applicable Law 6. NIPSCO considers the provisions of the Public Service Commission Act, as amended, including Ind. Code 8, 8, 8, 86, 8 6, 88.9 and 88.0 to be applicable to the subject matter of this Petition and believes that such traditional statutes provide the Commission authority to approve the requested relief. The Commission s administrative rule on demand side management, 70 IAC 8 et seq., is also applicable. Petitioner s Counsel 7. The names and addresses of persons authorized to accept service of papers in this proceeding are: 9

10 Counsel of Record: Claudia J. Earls (No. 8689) NiSource Corporate Services Legal 0 West Market Street, Suite 600 Indianapolis, Indiana 60 Phone: (7) 689 Fax: (7) cjearls@nisource.com With a copy to: Alison M. Becker NORTHERN INDIANA PUBLIC SERVICE COMPANY 0 W. Market Street, Suite 600 Indianapolis, Indiana 60 Phone: (7) 6890 Fax: (7) abecker@nisource.com Request for Prehearing Conference and Preliminary Hearing 8. In accordance with 70 IAC.(b) of the Commission s Rules of Practice and Procedure, NIPSCO requests that the Commission schedule a prehearing conference and preliminary hearing for the purpose of fixing a procedural schedule in this proceeding and considering other procedural matters as soon as possible. NIPSCO will work with its stakeholders to seek agreement regarding scheduling matters in this proceeding in lieu of a prehearing conference. 9. NIPSCO requests that an evidentiary hearing on this matter be set and noticed as required by law. So that the 0608 Electric EE Program may be timely implemented commencing January, 06, NIPSCO requests a final Commission order approving the relief sought herein on or before December, 0. Absent approval, DSM and energy efficiency program offerings authorized for 0 will cease until approval in this case is received. WHEREFORE, respectfully requests that the Commission promptly publish notice, make such other 0

11 investigation and hold such hearings as are necessary or advisable and thereafter, make and enter appropriate orders in this Cause: (a) Approving NIPSCO s 0608 Electric EE Program, as described above, to be effective for the period January, 06 through December, 08; (b) Authorizing and approving NIPSCO s cost recovery through the DSMA Mechanism of the Energy Efficiency Program Costs; (c) Approving all accounting and ratemaking treatment requested herein, including the authority to defer and recover () the over and under recoveries of projected Energy Efficiency Program Costs through the DSMA Mechanism pending reconciliation in subsequent rider periods and approving the deferral of any costs incurred implementing the energy efficiency programs prior to the time the Commission issues an Order in this proceeding authorizing NIPSCO to recognize these costs through the ratemaking process; and () lost revenues for previous program years, including DSM and energy efficiency programs previously offered but subsequently discontinued, through the DSMA Mechanism, until such amounts are recovered through rates. (d) Approving NIPSCO s request to utilize its existing NIPSCO Oversight Board to administer the 0608 Electric EE Program;

12 (e) Approving NIPSCO s request to continue the same evaluation, measurement and verification program for its 0608 Electric EE Program; (f) Approving NIPSCO s request to file its annual EM&V results within 0 days of approval of the final EM&V report by its OSB; and (g) Granting to NIPSCO such additional and further relief as the Commission may be deemed necessary or appropriate.

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15 Petitioner s Exhibit No. Page VERIFIED DIRECT TESTIMONY OF ALISON M. BECKER 6 Q. Please state your name, business address and job title. A. My name is Alison M. Becker. My business address is 0 W. Market Street, Suite 600, Indianapolis, Indiana 60. I am employed by Northern Indiana Public Service Company ( NIPSCO or the Company ), which is a subsidiary of NiSource Inc. ( NiSource ). My current position is Manager of Regulatory Policy Q. Please summarize your educational and employment background. A. I graduated from the University of Evansville with a Bachelor of Arts degree with a double major in History and Political Science. I also hold a Masters of Business Administration from Valparaiso University and am pursing a law degree from the Indiana University Robert H. McKinney School of Law. I was a Governor s Fellow from 997 to 998 and then worked as a Budget Analyst for the Indiana State Budget Agency from 998 to 000. In 000, I joined the Indiana Family and Social Services Administration as the Director of Fiscal Services for the Division of Disability, Aging and Rehabilitative Services and was promoted to the Director of Developmental Disabilities

16 Petitioner s Exhibit No. Page Services in 00. From 00 until 008, I held management positions within nonprofit organizations providing services to individuals with developmental disabilities and community health centers. I joined NiSource in 008 as a Lead Performance Measurement Analyst in Information Technology Service Performance. After leaving the Company briefly in 008, I accepted the position of Senior Analyst, Regulatory Policy for NIPSCO in 009 and was promoted to my current position as Manager, Regulatory Policy in Q. What are your responsibilities as Manager of Regulatory Policy? A. As Manager of Regulatory Policy, I am and/or have been responsible for supporting a variety of regulatory initiatives before the Indiana Utility Regulatory Commission ("Commission") including: NIPSCO s electric and gas demand side management ( DSM ) filings; NIPSCO s electric vehicle and economic development pilot approved in Cause No. 06; the development, negotiation and filing of NIPSCO s demand response tariffs approved in Cause No. 66MISO; and the development of revised line extension practices governing residential real estate developments as approved by the Commission in Cause No I also serve as Chair of the

17 Petitioner s Exhibit No. Page Demand Side Management Coordination Committee ( DSMCC ) and as a member of its subcommittees, as created in the Commission s December 9, 009 Phase II Order in Cause No. 69 ( Phase II Order ) Q. What is the purpose of your testimony? A. The purpose of my testimony is to () describe NIPSCO s DSM history and current electric DSM program; () describe NIPSCO s request for relief, () describe NIPSCO s proposed electric energy efficiency program for the period 0608, () discuss the impact of Ind. Code 88.9 ( Section 9 ) and Ind. Code 88.0 ( Section 0 ) on energy efficiency; () describe NIPSCO s plan goals, programs, budgets, costs and procedures (including NIPSCO s proposed oversight board ( OSB ), evaluation, measurement and verification ( EM&V ) program and reporting requirements); (6) describe the allocation of Energy Efficiency Program Costs; (7) describe NIPSCO s pursuit of energy efficiency from a policy perspective, (8) discuss integrated resource planning as it relates to energy efficiency; and (9) describe why NIPSCO s proposed electric energy efficiency program is in the public interest. 7 8 Q. Why is NIPSCO proposing to offer energy efficiency programs to its customers?

18 Petitioner s Exhibit No. Page A. NIPSCO recognizes the benefits of energy efficiency and wants to provide those benefits to its customers, while maintaining an appropriate balance between costs and benefits. To that end, NIPSCO seeks to provide a robust, cost effective portfolio of programs available to all customer classes, while taking steps to minimize the impact on its ratepayers. Because customers can face budget constraints, NIPSCO takes into account the impact of these programs on the customer s bill as well as the expected benefits. As I discuss in more detail later, NIPSCO s Integrated Resource Plan ( IRP ), which was submitted to the Commission on October, 0 ( 0 IRP ), projects that NIPSCO has sufficient existing energy resources to meet the needs of its customers through 0. As such, NIPSCO used the forecasted available energy efficiency for the timeframe of 06 through 08 and worked with its stakeholders to develop a proposed energy efficiency program that balances the benefits for customers with the cost to customers of providing those savings. 6 7 Q6. What are the general benefits to NIPSCO s customers of implementing an energy efficiency program? The redacted version of NIPSCO s 0 IRP is available at

19 Petitioner s Exhibit No. Page 6 A6. Participants in the various energy efficiency programs will realize bill savings by reducing their consumption of energy. In addition, all customers realize savings based upon avoided energy costs. Finally, while NIPSCO s 0 IRP does not project the immediate need for additional generating capacity, customers may in the long term also realize savings for avoided capacity costs and receive revenue from the auction of capacity Q7. Are you sponsoring any exhibits? A7. Yes. I am sponsoring Petitioner s Exhibit No. A, which is a copy of NIPSCO s Verified Petition filed in this Cause, Petitioner s Exhibit No. B, which is a copy of certain of NIPSCO s schedules utilized in its DSM tracker proceedings (Cause No. 68DSMXX) that are being revised to accommodate recovery of performance incentives, Petitioner s Exhibit No. C, which is a copy of Section Existing Resources from NIPSCO s 0 IRP, and Petitioner s Exhibit No. D, which shows the forecast of energy savings associated with the implementation of the four energy efficiency programs selected as a result of the integration process for the 0 IRP.

20 Petitioner s Exhibit No. Page NIPSCO s DSM History and Current Electric DSM Program Q8. Please summarize NIPSCO s DSM history and the Commission orders authorizing NIPSCO s prior and current electric DSM programs. A8. On May, 0, the Commission issued an Order in Cause No. 68 approving NIPSCO s request for approval of the DSMA Mechanism through Rule of NIPSCO s General Rules and Regulations (now Rider 68 Adjustment of Charges for Demand Side Management Adjustment Mechanism) and Appendix G Demand Side Management Adjustment Mechanism Factor. 0 On July 7, 0, the Commission issued an Order in Cause No. 9 approving, among other things, NIPSCO s proposed Core and Core Plus energy efficiency programs (the 9 Programs ), budgets for its 9 Programs, authority to recover Program Costs, and the NIPSCO OSB. The 9 Programs expired on December, On January, 0, the Core Programs approved by the Commission in its Phase II Order and administered by the Third Party Administrator ( TPA ) approved by the Commission in its July 7, 0 Order on TPA & EM&V Contracts in Cause No. 69S, became available on a statewide basis. The

21 Petitioner s Exhibit No. Page 7 statewide Core programs approved by the Commission in the Phase II Order were in effect through December, 0. 6 On August 8, 0, the Commission issued an Order in Cause No. ( Order ) approving, among other things, NIPSCO s request for approval to recover lost revenue associated with reduced sales attributable to NIPSCO s Commissionapproved electric DSM programs On December 8, 0, the Commission issued an Order in Cause No. 6 approving NIPSCO s request for approval of a portfolio of electric DSM programs through December, 0 along with the continued authority to recover Program Costs and lost revenues associated with those programs. The Commission also authorized the continuation of the NIPSCO OSB. The 6 Programs expired on December, On November, 0, the Commission issued an Order in Cause No. 96 (the 96 Order ) approving NIPSCO s request for () approval of electric DSM programs for the term of January, 0 through December, 0 (the 0 Electric DSM Program ), () authority to recover Program Costs associated with the 0 Electric DSM Program through the DSMA

22 Petitioner s Exhibit No. Page Mechanism, () authority to defer expenses associated with the 0 Electric DSM Program that are incurred until such amounts are recovered through rates; () authority to recover lost revenues associated with the 0 Electric DSM Program, as well as lost revenues associated with previous programs years, including those lost revenues associated with prior programs that are not included in the 0 Electric DSM Program, through the DSMA Mechanism, and () authority to defer lost revenues associated with the 0 Electric DSM Program and lost revenues for previous program years, including DSM programs previously offered but subsequently discontinued, through the DSMA Mechanism, until such amounts are recovered through rates. The 0 Electric DSM Program is set to expire on December, NIPSCO s Request for Relief Q9. Please describe the relief that NIPSCO seeks in this proceeding. A9. In this proceeding, NIPSCO requests Commission approval of its: () energy efficiency goals; () portfolio of electric energy efficiency programs to be effective for the period January, 06 through December, 08 and associated ratemaking and accounting mechanisms ( 0608 Electric EE Program ); () program budgets / costs; and () proposed EM&V. The 06

23 Petitioner s Exhibit No. Page 9 08 Electric EE Program includes offerings to all customer classes, including low income customers, and provides for industrial customer opt out in accordance with Section Q0. Please describe the energy efficiency programs included in the 0608 Electric EE Program. A0. The following energy efficiency programs are included in the 0608 Electric EE Program: 8 Residential Programs 9 0 Residential HVAC Program Residential Lighting Program Residential Appliance Recycling Program Income Qualified Appliance Replacement Program Home Energy Assessments Program School Education Program Behavioral Program 6 Commercial & Industrial ( C&I ) Programs Prescriptive Program Custom Program New Construction Program

24 Petitioner s Exhibit No. Page 0 RetroCommissioning Program Small Business Direct Install Program 6 Q. What is the proposed term of the 0608 Electric EE Program? A. NIPSCO proposes a threeyear term of January, 06 through December, 08 for its 0608 Electric EE Program Q. Please describe NIPSCO s cost recovery proposal. A. Consistent with the provisions of Ind. Code 88.9 and 88.0, the 0608 Electric EE Program cost recovery proposal includes a request for accounting and ratemaking procedures to recover, through NIPSCO s DSMA Mechanism, all Program Costs (consistent with the provisions of 70 IAC 8 ), lost revenues (consistent with the provisions of 70 IAC 86) and financial incentives, though a performance incentive (consistent with the provisions of 70 IAC 87). The 0608 Electric EE Program cost recovery proposal also includes a request to defer and recover the over and under recoveries of projected Energy Efficiency Program Costs through the DSMA Mechanism pending reconciliation in subsequent periods and approval to defer any Program Costs incurred in implementing the 0608 Electric EE Program prior to the time the Commission issues an order

25 Petitioner s Exhibit No. Page authorizing NIPSCO to recognize these costs through the ratemaking process. NIPSCO proposes to implement the cost recovery as part of its ongoing DSMA Mechanism reconciliation proceedings, docketed as Cause No. 68DSMX Q. Please describe NIPSCO s projected budget and estimated costs associated with the 0608 Electric EE Program. A. NIPSCO witness Victoria Vrab describes NIPSCO s proposed budgets for the 0608 Electric EE Program. NIPSCO s total estimated Program Costs, including lost revenue and performance incentives ( Energy Efficiency Program Costs ), of the 0608 Electric EE Program for the period January, 06 through December, 08 are projected to be approximately $.9 million. The lost revenue portion of this amount is estimated to be $7.8 million. Please note: the lost revenues will reset at the conclusion of NIPSCO s next base rate case, which will be filed before the end of 0. The performance incentives portion of this amount is estimated to be $. million. NIPSCO also seeks authority, with the approval of its OSB, to spend amounts that were previously approved by the Commission but not spent. 8 Q. Please describe the authority NIPSCO is requesting for lost revenues.

26 Petitioner s Exhibit No. Page A. NIPSCO is requesting continued authority to recover lost revenues associated with its 0608 Electric EE Programs, as well as lost revenues associated with previous program years, including those lost revenues associated with prior programs that are not included in the 0608 Electric EE Program, through the DSMA Mechanism. NIPSCO is also requesting continued authority to defer lost revenues from previous program years, including DSM and energy efficiency programs previously offered but subsequently discontinued, through the DSMA Mechanism, until such amounts are recovered through NIPSCO s rates. NIPSCO s lost revenues are the difference between the revenues lost and the variable operating and maintenance costs saved by the Company as a result of implementing an energy efficiency program Q. Why is it appropriate for NIPSCO to continue to collect lost revenues for measures associated with prior programs that are not included in the Electric EE Program? A. Lost revenues associated with DSM and energy efficiency measures that were previously installed as part of programs NIPSCO is planning to discontinue do not cease when the program ends. In its Order, the

27 Petitioner s Exhibit No. Page 6 Commission approved recovery of lost revenues associated with measures installed through NIPSCO s approved DSM and energy efficiency programs for the remainder of their useful lives. Thus, it is appropriate to continue to collect lost revenues associated with those approved programs in the same manner they would be collected if the program had continued. See Order at Q6. Why is it appropriate for NIPSCO to recover lost revenues for the life of the measure rather than a shorter period (i.e. three years)? A6. Using any time period other than the life of the measure is arbitrary. For example, replacing a less efficient air conditioner that has years of life left with a high efficiency model means that those revenues associated with the other unit are lost for years. That number is based on the expected useful life ( EUL ) which is determined by an independent evaluator. Setting the number at anything other than the EUL value as determined by the independent evaluator simply means that a random number is chosen for some other reason. In addition, lost revenues are reset with each rate case, meaning there are two ways to limit the recovery of lost margins: the EUL and a rate case. In addition, it is notable that the General Assembly did not

28 Petitioner s Exhibit No. Page choose to address a time limit on recovery of lost revenues or a specific timeframe for a rate case in the recently passed Senate Enrolled Act ( SEA ), unlike it did in requiring a rate case at least every seven years for a utility with a Transmission, Distribution and Storage System Improvement Charge tracker that was created through SEA 60 in Q7. Please describe NIPSCO s request for recovery of performance incentives? A7. NIPSCO now has several years of EM&V on its programs and is able to demonstrate a track record of commitment to energy efficiency and proven benefits to its customers. For longterm success of utilitysponsored energy efficiency, performance incentives are necessary to make energy efficiency investments competitive with supplyside resources where the organization receives a return on its investment. Therefore, NIPSCO is requesting performance incentives, in the form of a shared savings mechanism. It is important to note that the total amount of shared savings recovered by program will not exceed % of the program cost, excluding administrative and EM&V costs. NIPSCO is suggesting a cap on the amount of shared savings recoverable by program for both Residential and C&I segments. In addition, because the program is meant to provide benefits to low income

29 Petitioner s Exhibit No. Page customers, NIPSCO is not seeking to recover a share of those benefits attributed to the Residential Low Income Appliance Replacement program Q8. Has the Commission indicated under what circumstances performance incentives should be considered for utilities offering DSM and energy efficiency programs? A8. The Commission s Rule (70 IAC 8) allows for an electric utility to receive performance incentives to keep demand side management programs on equal footing with supplyside resources under which the utility earns a return on its investment. The National Action Plan for Energy Efficiency noted that successful energy efficiency programs would be promoted by aligning utility incentives in a manner that encourages the delivery of energy efficiency as part of a balanced portfolio of supply, demand, and transmission investments. As the Commission stated in Indianapolis Power and Light Company s most recent DSM program approval, Indiana recognizes that the offering of incentives is an acceptable and appropriate National Action Plan for Energy Efficiency Report, U.S. Department of Energy, U.S. Environmental Protection Agency, July 006, Page ES7. and Aligning Utility Incentives with Investment in Energy Efficiency A resource of the National Action Plan for Energy Efficiency, U.S. Department of Energy, U.S. Environmental Protection Agency, November

30 Petitioner s Exhibit No. Page means of encouraging costeffective DSM and offsetting the financial bias for supplyside resources. Both SEA 0 and our DSM rules allow for investment or shareholder incentives. In addition, as I discuss in more detail below, Section 0 allows for the recovery of reasonable financial incentives that encourage the implementation of cost effective energy efficiency programs through the elimination of a regulatory or financial bias that would otherwise exist in favor of supply side resources, upon which NIPSCO is able to earn a return on its investment. NIPSCO is requesting to do this based on the performance of its programs, as measured by the benefits those programs provide to its customers. 6 7 Q9. What is a shared savings mechanism? A9. A shared savings mechanism is an incentive for the implementation of cost effective DSM and energy efficiency programs as it shares the calculated net benefits of the DSM and energy efficiency programs between customers and NIPSCO. A shared savings mechanism represents one method of eliminating or offsetting the regulatory or financial bias against DSM and energy efficiency as it helps place demand side resources on an equal footing as Final Order in Cause No. 97 page.

31 Petitioner s Exhibit No. Page 7 supply side resources. The incentive is tied to the net benefits delivered through the energy efficiency programs and the magnitude of the incentive is tied to the cost effectiveness of the programs. As stated above, NIPSCO is not seeking to recover performance incentives from the Residential Low Income Appliance Recycling program Q0. How will the Industrial Opt Out be handled with regard to performance incentives? A0. Customers who elect to opt out of NIPSCO s energy efficiency program will continue to have a charge or credit for program costs, either for costs accrued or incurred while the customer was participating in the energy efficiency program or for reconciliation of costs for the time period during which the customer was participating in the energy efficiency program. In addition, those customers will continue to have a charge or credit for projected lost revenues and performance incentives as well as reconciliation of lost revenues and performance incentives for the appropriate time period (i.e. the life of the measure or a base rate case for lost revenues and period of participation for performance incentives). For example, a customer opting out of participation effective January, 07 would be responsible for its

32 Petitioner s Exhibit No. Page 8 share of performance incentives earned by NIPSCO during 06. Additional information on how these costs will be assessed is included in Rider Q. Will NIPSCO need to make any changes to its schedules used in its semiannual tracker proceedings to accommodate the recovery of performance incentives? A. Yes. NIPSCO s schedules utilized in its DSM tracker proceedings (Cause No. 68DSMXX) have been revised to accommodate the recovery of performance incentives. Specifically, NIPSCO is proposing to add a Schedule. which will show projected performance incentives as well as the reconciliation of the performance incentives. Schedule. has been updated to note that performance incentives are allocated in the same way as program costs, but no other changes are proposed to that schedule. Finally, on Schedule 7, Column (c) has been updated to note that performance incentives are included with the allocation of program costs. For simplicity, NIPSCO has only included the revised schedules in Petitioner s Exhibit No. B. 6 7 Q. How does NIPSCO s request in this proceeding affect its semiannual tracker filing?

33 Petitioner s Exhibit No. Page A. NIPSCO s next semiannual tracker filing (Cause No. 68DSM9) will be filed on or about October, 0. Since the projection of Energy Efficiency Program Costs included in that filing is for the period January through June 06, NIPSCO s DSM9 tracker filing will assume NIPSCO will receive approval of its request in this proceeding. To the extent necessary, NIPSCO will make any adjustments to its DSM9 filing once an Order has been received in this proceeding Section 9 and Section 0 Q. Please describe Section 9. A. Section 9, which became law on March 7, 0, (a) creates the ability for certain customers to opt out of participation in an electric utility s energy efficiency program; (b) requires the Commission to prepare a status report regarding energy efficiency programs implemented under the Phase II Order; (c) prohibits the renewal or extension of an existing contract or entry into a new contract with a statewide thirdparty administrator ( TPA ) as established by the Phase II Order; (d) eliminates any goals or targets related to energy savings established by the Phase II Order; (e) allows an electric December 9, 009 Phase II Order in Cause No. 69 ( Phase II Order ).

34 Petitioner s Exhibit No. Page utility to continue to recover program costs that accrued or were incurred under the Phase II Order and approved by the Commission; (f) allows an electric utility to offer a cost effective portfolio of energy efficiency programs to customers, and, if the Commission determines that the portfolio is reasonable and cost effective, to recover energy efficiency program costs in the same manner as such costs were recoverable under the Phase II Order; and (g) prohibits the Commission from requiring an energy efficiency program to be implemented by a TPA or consider whether a TPA implements the program when making its decision Q. How does Section 9 impact NIPSCO s 0608 Electric EE Program? A. First, in preparing its budgets and program offerings, NIPSCO forecasted the amount of eligible C&I load that had previously opted out of participation in NIPSCO s 0 Electric DSM Program. Although the forecast developed for the IRP assumed no customers would opt out of the program, for purposes of program design for the 0608 Electric EE Program, NIPSCO and its winning bidder assumed that only the load that had previously opted out of participation would remain opted out and that no additional customers would opt out.

35 Petitioner s Exhibit No. Page Second, rather than having a portfolio of programs administered on a statewide basis by a single third party and a portfolio of programs administered by NIPSCO, NIPSCO will continue to administer its entire portfolio of energy efficiency programs so that it best meets the needs of its service territory Finally, due to the elimination of the savings goals imposed in the Phase II Order, and as discussed in greater detail below, NIPSCO structured its Electric EE Program based on the forecasted available savings during the 0608 program years. However, given the timing of when the forecast was completed, the assumption was that no customers would opt out of NIPSCO s program. 6 Q. Does Section 9 address how Energy Efficiency Program Costs will be treated for qualifying customers electing to opt out? A. Yes. Section 9 defines energy efficiency program costs to include program costs, lost revenues and incentives approved by the Commission. Section 9(l) provides that: 7 8 After December, 0, an electricity supplier may continue to timely recover energy efficiency program costs that:

36 Petitioner s Exhibit No. Page () accrued or were incurred under or relate to an energy efficiency program implemented under the DSM order issued by the commission on December 9, 009; and () are approved by the commission for recovery. As a result, qualifying NIPSCO customers electing to opt out will remain responsible for their share of these energy efficiency program costs associated with approved energy efficiency programs from periods prior to the effective date of their optout. NIPSCO s currentlyeffective Rider 68 (approved in Cause No. ) reflects how Energy Efficiency Program Costs will be treated for qualifying customers electing to opt out Q6. Please describe Section 0. A6. Section 0, which became law on May 6, 0, (a) provides that beginning not later than calendar year 07, and not less than once every three years an electricity supplier shall petition the Commission for approval of a plan that includes energy efficiency goals, energy efficiency programs to achieve the energy efficiency goals, program budgets and program costs, and EM&V procedures that must include independent EM&V; (b) provides the mechanism for the Commission to determine the overall reasonableness of the plan and how the Commission shall proceed in the event the Commission

37 Petitioner s Exhibit No. Page determines the plan is reasonable in its entirety or is not reasonable because of the costs associated with one or more programs exceed the projected benefits of the program or programs; (c) provides that if the Commission finds a plan submitted by an electricity supplier to be reasonable, the Commission shall () approve the plan in its entirety, () allow the electricity supplier to recover all associated program costs on a timely basis through a periodic rate adjustment mechanism, and () allocate and assign costs associated with a program to the class or classes of customers that are eligible to participate in the program; (d) prohibits the Commission from requiring an energy efficiency program to be implemented by a third party administrator or from considering whether a third party administrator will implement an energy efficiency program when making a determination regarding the reasonableness of the plan; (e) provides that if the Commission finds a plan to be reasonable, the electricity supplier shall be allowed to recover or receive reasonable performance incentives and lost revenues, which may be based on a reasonable forecast so long as a reconciliation method is included to correct for any variance; and (f) provides an industrial customer may opt out of an electricity supplier s plan and that an industrial

38 Petitioner s Exhibit No. Page customer who has previously opted out of an energy supplier s plan shall continue to be opted out under any plan approved by the Commission. 6 Q7. How does Section 0 impact NIPSCO s 0608 Electric EE Program? A7. While Section 0 had very little impact on NIPSCO s design of the 0608 Electric EE Program, as I and other NIPSCO witnesses demonstrate, the Electric EE Program comports with the statute Q8. Does the 0608 Electric EE Program meet the requirements of a plan to be submitted under Section 0? A8. Yes. First, the 0608 Electric EE Program includes energy efficiency goals that are () reasonably achievable; () consistent with NIPSCO s 0 IRP, and () designed to achieve an optimal balance of energy resources in NIPSCO s service territory. Second, the 0608 Electric EE Program includes energy efficiency programs that are () sponsored by an electricity supplier and () designed to implement energy efficiency improvements. 6 Third, the 0608 Electric EE Program includes program budgets. 7 Fourth, the 0608 Electric EE Program includes program costs which

39 Petitioner s Exhibit No. Page 6 include () direct and indirect costs of energy efficiency programs, () costs associated with the EM&V of program results, () recovery of lost revenues and performance incentives. For purposes of this filing, the direct costs are those associated with implementing the programs, including any costs associated with program start up, while indirect costs are the NIPSCO administrative costs. 7 8 Finally, the 006 Electric EE Program includes the EM&V procedures that involve an independent EM&V Q9. Should the definition of Program Costs used in Section 0 be used in determining benefitcost test results for energy efficiency programs? A9. No. The General Assembly used a definition of program costs relative to the specific section of Indiana Code being added. This is different from the definition of program costs that are used from the evaluation of programs. For the evaluation of programs, including the benefitcost tests, the definitions previously used should continue to apply. This means that program costs in the determination of the benefits and costs of a particular program may not include EM&V costs or other recoveries or incentives approved by the Commission. However, if the test is designed to include

40 Petitioner s Exhibit No. Page 6 any of those costs in the measurement of the program s cost and benefits, those costs will continue to be included. It is important to note that legislative clarity often requires different definitions than those used by EM&V professionals Q0. Section 0 sets out what the Commission should consider in making a determination of the overall reasonableness of a plan. Is NIPSCO providing that information in this filing? A0. Yes. NIPSCO is providing the following information for the Commission s consideration in making a determination of the overall reasonableness of the 006 Electric EE Program: () Projected changes in customer consumption of electricity resulting from the implementation of the plan. NIPSCO witness Richard A. Morgan provides this analysis. 6 () A cost and benefit analysis of the plan, including the likelihood of achieving the goals of the energy efficiency programs included in the plan. Mr. Morgan provides this analysis. 7 () Whether the plan is consistent with (a) the state energy analysis

41 Petitioner s Exhibit No. Page developed by the Commission and (b) the electricity supplier s most recent long range integrated resource plan submitted to the Commission. NIPSCO s plan is consistent with the State Utility Forecasting Group s analysis in the Indiana Electricity Projections: The 0 Forecast as well as NIPSCO s specific energy efficiency forecasting, and is consistent with and includes the programs selected by the 0 IRP modeling process that were included in the 0 IRP. Because the plan goes beyond what was selected by the 0 IRP, it provides a mechanism to assist NIPSCO in meeting future load growth, which is one of the criteria included in the Commission s analysis. I provide additional details below relating to how the Electric EE Program is consistent with NIPSCO s 0 IRP and Ms. Vrab explains NIPSCO s decision to expand upon the program offering () The inclusion and reasonableness of procedures to evaluate, measure, and verify the results of the energy efficiency programs included in the plan, including the alignment of the procedures with applicable environmental regulations, including federal regulations concerning

42 Petitioner s Exhibit No. Page 8 credits for emission reductions. The 0608 Electric EE Program includes reasonable EM&V procedures to verify the results of the energy efficiency programs. Ms. Vrab describes the EM&V procedures, including the alignment of the procedures with applicable environmental regulations () Any undue or unreasonable preference to any customer class resulting, or potentially resulting, from the implementation of an energy efficiency program or from the overall design of a plan. NIPSCO s 0608 Electric EE Program is specifically designed and implemented to ensure residential customers benefit from and pay for residential programs and C&I customers benefit from and pay for C&I programs. Although residential customers are not paying to provide benefits to C&I customers, all customers receive the benefits of decreased energy usage (6) Comments provided by customers, customer representatives, the Office of Utility Consumer Counselor, and other stakeholders concerning the adequacy and reasonableness of the plan, including alternative or additional means to achieve energy efficiency in the

43 Petitioner s Exhibit No. Page electricity supplier s service territory. NIPSCO continues to build on the strong relationship it has with its OSB and works with them on program designs and vendor selection. The OSB selected the chosen vendors by a vote of 0, with the Industrial Group abstaining. In addition, as NIPSCO continues to refine program designs, it will take those designs to the OSB for final approval. Because NIPSCO is proposing a three year program, it is expected that NIPSCO and the OSB will continue to make adjustments to the programs throughout the program term. 0 (7) The effect, or potential effect, in both the long term and the short term, of the plan on the electric rates and bills of customers that participate in energy efficiency programs compared to the electric rates and bills of customers that do not participate in energy efficiency programs. Mr. Morgan provides this analysis (8) The lost revenues and performance incentives associated with the plan and sought to be recovered or received by the electricity supplier. As noted above, NIPSCO is requesting recovery of lost revenues and performance incentives associated with the 0608

44 Petitioner s Exhibit No. Page 0 Electric EE Program. Additional details relating to lost revenues and performance incentives are provided by Ms. Vrab. 6 7 (9) The electricity supplier s current integrated resource plan and the underlying resource assessment. NIPSCO has provided a link to its redacted 0 IRP and has included the relevant sections of its 0 IRP as exhibits in this proceeding. I also discuss the underlying resource assessment in NIPSCO s 0 IRP below The Plan Goals Q. Please describe NIPSCO s goal in implementing an electric energy efficiency program. A. NIPSCO s goal is to implement costeffective energy efficiency programs that reduce NIPSCO s energy requirements. NIPSCO is proposing a costeffective portfolio of programs that will reduce customers energy costs and also reduce regulated air emissions. Ms. Vrab provides the savings goals for each year of the 0608 Electric EE Program as follows: Residential Electric Gross kwh Savings Residential HVAC,6,000,707,000,87,000 Residential Lighting,9,000,8,000 0,0,000

45 Petitioner s Exhibit No. Page Residential Other 9,0,000 8,97,000 8,87,000 C&I Electric Gross kwh Savings C&I HVAC,0,000,09,000,77,000 C&I Lighting,7,000,7,000,6,000 C&I Other 6,87,000 7,8,000 7,0,000 C&I Process,7,000,89,000 8,0,000 Q. Why does NIPSCO consider these goals to be appropriate? A. As Ms. Vrab discusses in more detail, NIPSCO s goals are based on what was determined to be achievable based on a forecast completed by Applied Energy Group ( AEG ) in 0. With the assistance of Morgan Marketing Partners, NIPSCO has completed its own analysis that indicates that the goals are achievable in a cost effective manner. All of the measure groupings that were selected by the model in NIPSCO s 0 IRP are included in the 0608 Electric EE Program. While NIPSCO elected to include additional programs in order to offer a robust portfolio of options for its customers, the plan is consistent with the findings of its 0 IRP. Finally, these programs are designed to aid NIPSCO in achieving an optimal balance of energy resources in NIPSCO s service territory.

46 Petitioner s Exhibit No. Page Q. Do these goals meet the definition of energy efficiency goals as established by Section 0? A. Yes. Section 0 defines energy efficiency goals as all energy efficiency produced by cost effective plans that are reasonably achievable, consistent with an electricity supplier s IRP and designed to achieve an optimal balance of energy resources in an electricity supplier s service territory. NIPSCO has put together a plan that it finds to be achievable and that includes the programs selected by the IRP. This will allow NIPSCO to balance its energy resources as well as keeping the costs to customers in mind. 0 6 The Plan Programs Q. Please describe the programs included in NIPSCO s 0608 Electric DSM Program. A. The individual programs that make up NIPSCO 0608 Electric EE Program are set out above. NIPSCO s proposed 0608 Electric EE Program allows the Company to offer a robust portfolio of energy efficiency opportunities to its customers while mitigating the rate impact to customers.

47 Petitioner s Exhibit No. Page The Plan Program Budget Q. Please describe the methodology NIPSCO used to determine the budget for its 0608 Electric EE Program. A. Once AEG completed its work on the achievable savings in NIPSCO s service territory, NIPSCO issued requests for proposals ( RFPs ) for the residential and C&I programs. The RFPs were based on the achievable savings provided by AEG and in the same measure groupings as determined by the 0 IRP. NIPSCO then worked with its OSB to select the winning bidder based on the programs offered, the cost per kilowatt hour ( kwh ) saved and other factors such as the OSB s confidence in the vendor s ability to achieve the savings goals. NIPSCO then added % for its administrative costs and % for EM&V of the programs. Ms. Vrab provides the projected budgets for the 0608 Electric EE Program. Finally, NIPSCO forecasted the lost revenues and performance incentives for the three year period. Ms. Vrab describes those calculations in greater detail Q6. Since NIPSCO has already selected vendors for its Residential and C&I programs, will any expenses be paid prior to approval from the Commission?

48 Petitioner s Exhibit No. Page 6 A6. No. Both vendors have been notified that NIPSCO will not pay for any costs incurred unless and until a Final Order is received from the Commission in this Cause approving NIPSCO 0608 Electric EE Program. Thus, while the vendors may elect to begin work on transition issues prior to issuance of a Final Order in this Cause, NIPSCO ratepayers will not be responsible for any costs associated with any program not approved by the Commission The Plan Program Costs Q7. What are the programrelated costs to NIPSCO and its customers of implementing a DSM program? A7. General costs include direct program implementation, NIPSCO administration and EM&V. Ms. Vrab discusses the specific direct costs associated with NIPSCO s 0608 Electric EE Program Q8. What DSMrelated costs do the Commission s rules allow to be recovered by the utility? A8. 70 IAC 8 et seq. ( Rule 8 ) sets forth guidelines for DSM recovery (the DSM Rules ). 70 IAC 8 states that a utility is entitled to recover the reasonable cost of planning and implementing a DSM program and lists several alternative cost recovery methodologies. In addition, 70 IAC 86

49 Petitioner s Exhibit No. Page 6 permits a utility to recover lost revenue from the implementation of a DSM program and states that a utility is allowed an opportunity for earnings from prudent investments in both supply and demandside resources. Finally, 70 IAC 87 allows the Commission, when appropriate, to provide the utility with a financial incentive to encourage the participation in and promotion of a demandside management program The Plan Procedures Q9. What is NIPSCO proposing for oversight for the 0608 Electric EE Program? A9. The current OSB structure and process has been beneficial to both NIPSCO and its stakeholders. Therefore, NIPSCO proposes to maintain, without change, its NIPSCO OSB as most recently approved in the Commission s 96 Order Q0. Will the NIPSCO OSB continue to have authority to modify program design or program funding amounts? A0. Yes. Specifically, once the 0608 Electric EE Program has been approved by the Commission, the NIPSCO OSB will have the flexibility to shift costs within a program budget as needed, shift funds among programs so long as

50 Petitioner s Exhibit No. Page 6 the overall 0608 Electric EE Program budget is not exceeded and design and implement new programs as long as they pass the Total Resource Cost test and the overall 0608 Electric EE Program budget is not exceeded Q. What is NIPSCO proposing for EM&V for the 0608 Electric EE Program? A. NIPSCO proposes to maintain its EM&V process as most recently approved in the 96 Order. As Ms. Vrab further explains, NIPSCO wants to have a better understanding of the program designs before issuing an RFP for an EM&V vendor. NIPSCO will work with its OSB to select a vendor and anticipates having a vendor in place by the time the 0608 Electric EE Program launches in Q. What does NIPSCO intend to use as the framework for the EM&V of its programs? A. NIPSCO currently uses the statewide EM&V Framework adopted by the DSMCC as the basis for its evaluation activities. NIPSCO, the other utilities, and other stakeholders are working on an update to the statewide Framework. If that group is unable to agree on an updated framework for

51 Petitioner s Exhibit No. Page 7 use statewide, NIPSCO will work with its OSB in the development and adoption of a NIPSCOspecific framework Q. Please describe NIPSCO s proposed reporting requirements. A. To provide the Commission with the ability to monitor the progress of NIPSCO s 0608 Electric EE Program, NIPSCO proposes to file its annual EM&V results within 0 days of approval of the final EM&V report by its OSB. NIPSCO will also file a scorecard that includes program descriptions and performance updates in each of its semiannual tracker filings (Cause No. 68DSMX). The scorecard will be for the reconciliation period included in the tracker filing. For example, in NIPSCO s next DSM tracker proceeding (Cause No. 68DSM9), NIPSCO will include a scorecard reflecting performance for the period January through June Energy Efficiency Program Cost Allocations Q. Is NIPSCO proposing to change the way it allocates Program Costs for its 0608 Electric EE Program? A. No. NIPSCO will continue to allocate Program Costs for all programs on a per kwh basis based on the six month kwh sales forecast for each Rate Schedule.

52 Petitioner s Exhibit No. Page 8 6 Q. Is NIPSCO proposing to change the way it allocates costs associated with lost revenues? A. No. NIPSCO will continue to forecast lost revenues by forecasting net energy and net demand savings by allocating projected energy savings in its energy forecast for most rates except the Residential Home Energy Conservation program which is forecasted based on customer count Q6. How does NIPSCO propose to allocate performance incentives? A6. NIPSCO proposes to allocate its performance incentives in the same manner as the allocation of Program Costs on a per kwh basis based on the six month kwh sales forecast for each Rate Schedule Policy Perspective Q7. What is the current regulatory framework in Indiana applicable to NIPSCO s proposal in this proceeding? A7. The current regulatory framework, including statutory and administrative code provisions and prior Commission orders, encourages electric utilities to meet customers resource needs through supply and demandside resource options in a leastcost manner. The DSM Rules include a statement that the rule s purpose is to:

53 Petitioner s Exhibit No. Page [provide] a regulatory framework that allows a utility an incentive to meet long term resource needs with both supplyside and demandside resource options in a leastcost manner and ensures that the financial incentive offered to a DSM program participant is fair and economically justified. The regulatory framework attempts to eliminate or offset regulatory or financial bias against DSM, or in favor of a supplyside resource, a utility might encounter in procuring leastcost resources. The commission, where appropriate, will review and evaluate the existence and extent of regulatory or financial bias. (70 IAC 8(a)). Rule 8 further states that another purpose is: to ensure a utility s proposal is consistent with acquiring the leastcost mix of demand side and supplyside resources to reliably meet the long term electric service requirements of the utility s customers, the commission, where appropriate, will review and evaluate, as a package, the proposed DSM programs, DSM cost recovery, lost revenue, and shareholder DSM incentive mechanisms. (70 IAC 8(c)). These provisions were designed to meet national energy policy, and are still consistent with such national goals and policies today. In addition, parts of Rule 8 set out the requirements for utilities seeking cost recovery (70 IAC 8), lost margins (70 IAC 86) and performance incentives (70 IAC 87) for DSM programs. Both provisions require a fairly detailed EM&V showing, which I describe generally in my testimony and with which NIPSCO has and will continue to comply. The IRP Rules, which

54 Petitioner s Exhibit No. Page 0 I discuss later in my testimony, are also relevant Q8. Is NIPSCO s 0608 Electric EE Program consistent with the DSM Rules? A8. Yes. The DSM Rules require that a utility have a process and load evaluation plan to assess the implementation and quantify the impact on energy and demand. NIPSCO s EM&V process addresses this issue. Utilities must also be able to show that an incentive paid by the utility to the customer, when combined with the reduction in the participants utility bills, reflects the net benefit to the utility and all customers and that crosssubsidies are minimized between customer groups and between participants and nonparticipants within a customer group. The cost benefit tests discussed by Mr. Morgan address these concerns. In addition, NIPSCO s allocation mechanism assures that costs are allocated to the appropriate customer class. 6 Integrated Resource Planning Q9. Are you familiar with NIPSCO s 0 IRP? A9. Yes.

55 Petitioner s Exhibit No. Page Q0. Please generally describe how DSM and energy efficiency relates to NIPSCO s IRP process. A0. In accordance with the Guidelines for Integrated Resource Planning by an Electric Utility (70 IAC 7 et seq.) (the IRP Rules ) NIPSCO submits an IRP to the Commission every two years. The IRP is NIPSCO s assessment of a variety of demandside and supplyside resources to reliably and costeffectively meet customer electricity service needs. It is important to note that while NIPSCO considered demandside in addition to supplyside resources in developing its 0 IRP, the programs requested in this proceeding go beyond the programs selected by the modeling software to be included in the various plans. NIPSCO did this intentionally in order to offer a robust portfolio of energy efficiency opportunities to its customers. 6 7 Q. What is the IRP and what is its purpose? A. The IRP is the outcome of a planning process for electric utilities to evaluate a variety of demand and supplyside resources in order to select resources to reliably and costeffectively meet customers electricity service needs over the next 0 years. The IRP process strives to: 8 Evaluate available options, from both the supply and demand sides,

56 Petitioner s Exhibit No. Page in a fair and consistent manner; Provide safe, reliable, and costeffective service to customers; and Create a flexible plan that allows for review as needed, based on changing circumstances and new information. 6 NIPSCO uses the IRP process to evaluate future resource options. NIPSCO follows the process set out in the IRP Rules Q. Why must NIPSCO consider the relationship between its IRP process and its proposed DSM and energy efficiency programs? A. As stated above, the IRP Rules state specifically that a utility must consider a demandside resource as a source of new supply in meeting future electric service requirements, and a utility shall consider a comprehensive array of demandside measures that provide an opportunity for all ratepayers to participate in DSM (70 IAC 76(b)). Further, the IRP Rules require the performance of a costbenefit analysis using several tests to make sure the proposed resources are costeffective (70 IAC 77). 6 7 Q. How did NIPSCO evaluate DSM and energy efficiency programs for inclusion as a resources in its 0 IRP?

57 Petitioner s Exhibit No. Page A. NIPSCO evaluated potential demandside resources on a consistent and comparable basis with supplyside resources to provide safe, reliable and cost effective service to customers. Similar to developing assumptions for supplyside resources, NIPSCO developed assumptions for operating characteristics and associated costs for each of the demandside resource options. Both the supplyside and demandside resources were modeled as options available to the optimization model. The demandside resources were available to be selected by the model and integrated into the plan; they were evaluated like supplyside resources. Demandside resources were not treated as a reduction in the load forecast Q. How did NIPSCO integrate DSM and energy efficiency in its 0 IRP? A. As Ms. Vrab explains in greater detail, NIPSCO engaged AEG to identify the DSM and energy efficiency measures that would be appropriate for the NIPSCO service territory. NIPSCO conducted an initial screen of these various measures using the DSMore model by assessing the benefits (or avoided costs) against the costs of the measure. As such, if the benefits of a measure did not outweigh the costs, the measure was dropped from consideration. Potential DSM and energy efficiency measures were

58 Petitioner s Exhibit No. Page aggregated and prescreened for cost effectiveness using DSMore to conduct industry standard benefit cost tests. Those aggregated measures that passed with a Total Resource Cost Test and a Utility Cost Test of.0 or greater were evaluated as potential DSM and energy efficiency resources in the IRP. As a result, seven energy efficiency programs and one direct load control programs, along with supplyside resources, were integrated into the 0 IRP. Three residential and four commercial and industrial ( C&I ) energy efficiency programs were included. The table below shows the energy efficiency programs considered as well as those selected: Description Residential HVAC Initial Screen by DSMore Selected by IRP Residential Lighting Residential Other C&I HVAC C&I Lighting C&I Other 0 C&I Process The hourly energy impacts and associated costs were modeled as seven independent demandside programs. All of the demandside programs were represented as options and available to be selected for the IRP. NIPSCO used

59 Petitioner s Exhibit No. Page the dynamic programming logic of PROVIEW TM to evaluate combinations of available supplyside and demandside resource alternatives. In this process, all resources were considered on an equal footing. The optimal plan selected four energy efficiency programs, one direct load control program, and two Combined Cycle Gas Turbines ( CCGT ) The integration process started with market valuation of individual demandside and supply side resource options using the Strategist model. Market value is the price at which an asset would trade in a competitive auction setting. First, the energy savings characteristics and costs for each demandside option were input into the model. The model was run with and without each demandside resource option. For each model run, the supply portfolio net present value revenue requirement ( NPVRR ) was determined. The difference between the NPVRR with and without the option is the market value of the option. Next the optimal selfbuild plan using only aeroderivative combustion turbines ( CTs ), frame CTs and CCGT resources ( Gas Plan ) was identified. Any supplyside resources could have been used at this point to meet customer demand requirements. NIPSCO did not start with demandside resources since, on their own, they are insufficient to

60 Petitioner s Exhibit No. Page 6 meet customers demand requirements DSM options were then integrated with the Gas Plan to determine the optimal mix of DSM and gas resources ( DSM/Gas Plan ) to meet customers demand requirements. NIPSCO s market valuation of the DSM options was confirmed by their selection in the optimization. Of those seven options, NIPSCO selected one of the residential options and three of the C&I options to be part of the portfolio (see table above). It is important to note that only one residential program was selected as cost effective as part of NIPSCO s IRP process. Therefore, if NIPSCO only offered programs consistent with the IRP, residential customers would only have the Residential Lighting program. 6 7 Then, keeping DSM options in the plan, supply side resources were switched to nongas resource options to determine if these assets bring value to the NIPSCO system ( DSM/NonGas Plan ). This helped to identify the cost difference for various resource options, and allowed NIPSCO to look more closely at which specific resource options work better together to meet customers demand requirements.

61 Petitioner s Exhibit No. Page 7 6 Then, keeping DSM options in, supply side resources were switched to renewable resources to determine if these assets bring value to the NIPSCO system ( DSM/Renewable Plan ). The next model run maintained the DSM options and renewable resources in the portfolio and supplyside resources were switched to include gas resources to determine if these assets bring value to the NIPSCO system ( DSM/Gas/Renewable Plan ) Finally, the optimal plans for each model run were compared by looking at the NPVRR from Strategist. The DSM/Gas Plan resulted in the lowest NPVRR. NIPSCO also evaluated risks associated with future uncertainty through scenario and sensitivity analysis. Key market and nonmarket drivers were identified to define plausible future scenarios which bookend the potential future business climate range. A base case scenario was developed to establish the expected view of the future. Sensitivity analyses were performed in order to evaluate the impacts when different assumptions in key drivers are assumed. NIPSCO s objective was to minimize the NPVRR over the study period (00). 7 8 Q. What did NIPSCO use to determine its avoided costs for the purposes of screening DSM and energy efficiency measures for the IRP?

62 Petitioner s Exhibit No. Page 8 A. As Ms. Vrab discusses in greater detail, NIPSCO used a variety of inputs to account for energy, capacity, transmission and distribution and ancillary costs. Petitioner s Exhibit No. C shows the avoided cost calculation and assumptions included in Section (the assumptions are shown in Tables through 9) of NIPSCO s 0 IRP Q6. What was the forecast of energy savings associated with implementing the programs selected by the IRP model? A6. The forecast of energy savings associated with the implementation of the four energy efficiency programs selected as a result of the integration process for the 0 IRP are shown in Petitioner s Exhibit No. D. This exhibit shows the forecasted cumulative net energy savings for the resources selected by the model ( Cumulative Net ) which includes all of the savings NIPSCO has obtained to date with additional savings being added by new measures each year. The exhibit also shows the incremental savings projected to be obtained through the addition of measures each year ( Incremental Gross ). In terms of the percentage of cumulative net energy savings, for the years 06, 07, and 08, that is a forecast percentage energy savings of 0.8%,.8% and.0%, respectively.

63 Petitioner s Exhibit No. Page Q7. Did NIPSCO include the programs selected by the 0 IRP in its Electric EE Program? A7. Yes, all four of the energy efficiency programs selected by the IRP are included in NIPSCO s 0608 Electric EE Program. As Ms. Vrab explains in more detail, when determining the programs to include in the portfolio for the 0608 time period, NIPSCO elected to expand the variety of programs and the savings goal in order to offer a more robust program to its customers. NIPSCO s 0608 Electric EE Program goes beyond those programs selected by the IRP Strategist model to include other programs where AEG forecasted achievable savings but were not selected resources within the 0 IRP Q8. Once NIPSCO received the responses to the requests for proposals, were the results consistent with the projected costs and savings for those programs that were selected to be part of the IRP? A8. The tables below show the comparison between the costs used in developing the 0 IRP and those included in the winning bidders responses to the RFP. As you can see, C&I Lighting and C&I Other were more expensive per kwh and Residential Lighting and C&I Process were significantly less

64 Petitioner s Exhibit No. Page 0 expensive. In the aggregate, the winning bid had lower costs per kwh for the programs selected by the IRP than the amount included in the IRP. Per IRP $ / kwh Residential Lighting $ 0.7 $ 0. $ 0.8 C&I Lighting $ 0.08 $ 0.08 $ 0.09 C&I Other $ 0. $ 0.0 $ 0.09 C&I Process $ 0.7 $ 0.6 $ 0. Total DSM $ 0. $ 0. $ 0. From RFP Responses $ / kwh Residential Lighting $ 0.08 $ 0.09 $ 0.0 C&I Lighting $ 0.8 $ 0.7 $ 0.7 C&I Other $ 0. $ 0. $ 0. C&I Process $ 0.07 $ 0.07 $ 0.07 Total DSM $ 0. $ 0. $ Q9. Did NIPSCO rerun the IRP model to determine if the 0608 programs would be selected, based on the winning bidders projected costs and energy savings? A9. No. While the 0 IRP was used as a guide and reference when developing the RFPs for the 0608 programs, the bids reflected the actual market options that were available through the RFP process.

65 Petitioner s Exhibit No. Page Q60. Is NIPSCO s 0608 Electric EE Program consistent with other policies in the State of Indiana? A60. Yes. Although the State is currently updating its energy strategic plan, in 006, the State of Indiana, through the Indiana Office of Energy Development, established the Hoosier Homegrown Energy Strategic Plan ( Homegrown Energy Plan ) to encourage energy efficiency measures. The Homegrown Energy Plan supports further initiatives that allow Indiana to become a selfsufficient leader with respect to its energy needs. NIPSCO s 0608 Electric EE Program includes measures that will further the State s policy goals by encouraging reductions in energy consumption and increases in efficiency that can defer or eliminate the need for new generating resources Public Interest Q6. Is NIPSCO s 0608 Electric EE Program in the public interest? A6. Yes. As I touched on earlier, NIPSCO s 0608 Electric EE Program is designed to reduce load and benefit customers by providing opportunities for them to manage current energy costs and reduce or defer future generation needs. Additionally, the Company s program continues to

66 Petitioner s Exhibit No. Page provide revenue protection. The portfolio of programs and rate design are linked together to provide benefits to customers and the Company Q6. Why should the Commission approve NIPSCO s 0608 Electric EE Program? A6. NIPSCO s 0608 Electric EE Program is reasonable in its entirety. It provides programs for all participating ratepayers. Those programs are cost effective using standard industry tests and provide benefits to customers who participate as well as to those who do not. NIPSCO s request for performance incentives allows energy efficiency programs to be on an equal footing with supplyside options. Because NIPSCO s plan not only includes the programs selected by the 0 IRP, but includes additional programs in order to provide a robust portfolio of cost effective programs, the plan should be approved in its entirety and NIPSCO should be allowed to recover all associated program costs as defined by Section 0 on a timely basis through its DSMA Mechanism and to forecast, reconcile and allocate costs as I discussed above. 7

67 Petitioner s Exhibit No. Page Conclusion Q6. Does this complete your prepared direct testimony? A6. Yes.

68 VERIFICATION I, Alison M. Becker, Manager of Regulatory Policy for Northern Indiana Public Service Company, affirm under penalties of perjury that the foregoing representations are true and correct to the best of my knowledge, information and belief. Alison M. Becker Date: June, 0

69 Petitioner s Exhibit No. A [Verified Petition Not duplicated herein]

70 Petitioner's Exhibit No. B Demand Side Management Adjustment (DSMA) Allocation of Projected Performance Incentive Costs Billing Period January through June 06 Petitioner's Exhibit No. A Attachment A Schedule. Page of 6 Line No. Program Components Projected Performance Incentives Performance Incentives Variance January through June 06 Total Performance Projected Actual Total Variance Projected Incentives (a) (b) (c) (d) (e) (b) (a) (c) + (d) Prescriptive Rebate Program Commercial* $ $ $ $ $ School Education Program* $ $ $ $ $ Residential Home Energy Assessment Program* $ $ $ $ $ Residential Lighting Program* $ $ $ $ $ Residential Income Qualified Weatherization Program* $ $ $ $ $ 6 School Audits and Direct Install* $ $ $ $ $ 7 Residential Home Energy Assessment & Weatherization Program $ $ $ $ $ 8 AC Cycling Program $ $ $ $ $ 9 Energy Efficiency Rebate Program $ $ $ $ $ 0 Appliance Recycling Program $ $ $ $ $ C&I Custom Electric Incentive Program $ $ $ $ $ Residential Energy Conservation Program $ $ $ $ $ Residential Home Weatherization Program $ $ $ $ $ Residential Multifamily Direct Install Program $ $ $ $ $ C&I Custom Electric New Construction Incentive Program $ $ $ $ $ 6 Residential New Construction Program $ $ $ $ $ 7 Small Business Direct Install $ $ $ $ $ 8 Guest Room Energy Management Direct Install $ $ $ $ $ 9 NEST Thermostat Program $ $ $ $ $ 0 Total Core $ $ $ $ $

71 Petitioner's Exhibit No. B DSMA Projected Program Cost and Program Incentive January, 06 through June 0, 06 Billing Period January through June 06 Petitioner's Exhibit No. A Attachment A Schedule. Page of 6 Line No. Residential Home Energy Assessment Residential Income Qualified Weatherization Residential Home Energy Assessment & Weatherization Rate Schedule Prescriptive Rebate Program Commercial School Education Program Program Residential Lighting Program Program School Audits and Direct Install Program AC Cycling Program Energy Efficiency Rebate Program (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Appliance Recycling Program Projected Program Costs $ $ $ $ $ $ $ $ $ $ Projected Performance Incentives $ $ $ $ $ $ $ $ $ $ Total to Collect $ $ $ $ $ $ $ $ $ $ PROGRAM ALLOCATORS % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 6 Total Retail 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

72 Petitioner's Exhibit No. B DSMA Projected Program Cost and Program Incentive January, 06 through June 0, 06 Billing Period January through June 06 Petitioner's Exhibit No. A Attachment A Schedule. Page of 6 Line No. Rate Schedule (a) Residential Energy Conservation Program Residential Home Weatherization Program Residential Multifamily Direct Install Program C&I Custom Electric New Construction Incentive Program Residential New Construction Program Small Business Direct Install Guest Room Energy Management Direct Install (l) (m) (n) (o) (p) (q) (r) (s) (t) (u) C&I Custom Electric Incentive Program NEST Thermostat Program Total Line No. Projected Program Costs Projected Performance Incentives Total to Collect $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ PROGRAM ALLOCATORS Total Retail 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 6

73 DSMA Projected Program Cost and Program Incentive January, 06 through June 0, 06 Billing Period January through June 06 Residential Home Energy Assessment Residential Income Qualified Weatherization Residential Home Energy Assessment & Weatherization Petitioner's Exhibit No. A Attachment A Schedule. Page of 6 Line No. Rate Schedule Prescriptive Rebate Program Commercial School Education Program Program Residential Lighting Program Program School Audits and Direct Install Program AC Cycling Program Energy Efficiency Rebate Program Appliance Recycling Program (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) 7 Program Costs 8 6 $ $ $ $ $ $ $ $ $ $ 9 6 $ $ $ $ $ $ $ $ $ $ 60 6 $ $ $ $ $ $ $ $ $ $ 6 60 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 69 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7 6. $ $ $ $ $ $ $ $ $ $ 7 6. $ $ $ $ $ $ $ $ $ $ 7 6 $ $ $ $ $ $ $ $ $ $ 7 6. $ $ $ $ $ $ $ $ $ $ 7 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 77 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 8 6 $ $ $ $ $ $ $ $ $ $ 8 6. $ $ $ $ $ $ $ $ $ $ 8 6. $ $ $ $ $ $ $ $ $ $ 8 6. $ $ $ $ $ $ $ $ $ $ 8 66 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 89 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9 6. $ $ $ $ $ $ $ $ $ $ 9 6. $ $ $ $ $ $ $ $ $ $ 9 6 $ $ $ $ $ $ $ $ $ $ 9 6. $ $ $ $ $ $ $ $ $ $ 9 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 97 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 0 6 $ $ $ $ $ $ $ $ $ $ 0 6. $ $ $ $ $ $ $ $ $ $ 0 6. $ $ $ $ $ $ $ $ $ $ 0 6. $ $ $ $ $ $ $ $ $ $ 0 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 09 Total Retail $ $ $ $ $ $ $ $ $ $ Petitioner's Exhibit No. B

74 Petitioner's Exhibit No. B Rate Line No. Schedule (a) 7 Program Costs Total Retail DSMA Projected Program Cost and Program Incentive January, 06 through June 0, 06 Billing Period January through June 06 Residential Energy Conservation Program Residential Home Weatherization Program Residential Multifamily Direct Install Program C&I Custom Electric New Construction Incentive Program Residential New Construction Program Small Business Direct Install Guest Room Energy Management Direct Install (l) (m) (n) (o) (p) (q) (r) (s) (t) (u) C&I Custom Electric Incentive Program Petitioner's Exhibit No. A Attachment A Schedule. Page of 6 NEST Thermostat Program Total Line No. 7 $ $ $ $ $ $ $ $ $ $ 8 $ $ $ $ $ $ $ $ $ $ 9 $ $ $ $ $ $ $ $ $ $ 60 $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ 66 $ $ $ $ $ $ $ $ $ $ 67 $ $ $ $ $ $ $ $ $ $ 68 $ $ $ $ $ $ $ $ $ $ 69 $ $ $ $ $ $ $ $ $ $ 70 $ $ $ $ $ $ $ $ $ $ 7 $ $ $ $ $ $ $ $ $ $ 7 $ $ $ $ $ $ $ $ $ $ 7 $ $ $ $ $ $ $ $ $ $ 7 $ $ $ $ $ $ $ $ $ $ 7 $ $ $ $ $ $ $ $ $ $ 76 $ $ $ $ $ $ $ $ $ $ 77 $ $ $ $ $ $ $ $ $ $ 78 $ $ $ $ $ $ $ $ $ $ 79 $ $ $ $ $ $ $ $ $ $ 80 $ $ $ $ $ $ $ $ $ $ 8 $ $ $ $ $ $ $ $ $ $ 8 $ $ $ $ $ $ $ $ $ $ 8 $ $ $ $ $ $ $ $ $ $ 8 $ $ $ $ $ $ $ $ $ $ 8 $ $ $ $ $ $ $ $ $ $ 86 $ $ $ $ $ $ $ $ $ $ 87 $ $ $ $ $ $ $ $ $ $ 88 $ $ $ $ $ $ $ $ $ $ 89 $ $ $ $ $ $ $ $ $ $ 90 $ $ $ $ $ $ $ $ $ $ 9 $ $ $ $ $ $ $ $ $ $ 9 $ $ $ $ $ $ $ $ $ $ 9 $ $ $ $ $ $ $ $ $ $ 9 $ $ $ $ $ $ $ $ $ $ 9 $ $ $ $ $ $ $ $ $ $ 96 $ $ $ $ $ $ $ $ $ $ 97 $ $ $ $ $ $ $ $ $ $ 98 $ $ $ $ $ $ $ $ $ $ 99 $ $ $ $ $ $ $ $ $ $ 00 $ $ $ $ $ $ $ $ $ $ 0 $ $ $ $ $ $ $ $ $ $ 0 $ $ $ $ $ $ $ $ $ $ 0 $ $ $ $ $ $ $ $ $ $ 0 $ $ $ $ $ $ $ $ $ $ 0 $ $ $ $ $ $ $ $ $ $ 06 $ $ $ $ $ $ $ $ $ $ 07 $ $ $ $ $ $ $ $ $ $ 08 $ $ $ $ $ $ $ $ $ $ 09

75 Petitioner's Exhibit No. B Calculation of Demand Side Management Adjustment Factors Rider DSMA Billing Period January through June 06 Petitioner's Exhibit No. A Attachment A Schedule 7 Page 6 of 6 Gross Tax Factor: % Class DSMA Factors Total Total Total Total Total Total Total Total Total Allocation of Total Total Total Allocation of Allocation of Allocation of Allocation of Allocation of Allocation of Allocation of Allocation of Class Forecasted kwh Projected Program Allocation of 0 Allocation of 0 Allocation of Lost Margin Lost Margin Lost Margin Lost Margin Lost Margin Lost Margin Lost Margin Lost Margin Under/(Over) Total Class DSMA Factor Rate 06 Costs and EM&V Measures EM&V Measures Program Cost Variance Energy Measures Energy Measures Energy Measures Energy Measures Demand Measures Demand Measures Demand Measures Demand Measures Recovery of Allocation of DSMA Factor Adjusted for URTRS Line No. Schedule (Jan Jun) Performance Incentives PreJul ' Jul ' Dec ' Jan ' Jun ' PreJul ' Jul ' Dec ' Jan ' Dec ' Jan '6 Jun '6 PreJul ' Jul ' Dec ' Jan ' Dec ' Jan '6 Jun '6 Prior Period DSMA Costs ($/kwh) ($/kwh) (a) (b) ( c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) Sch. Sch. Sch. Sch. Sch. Sch. Sch. Sch. Sch. Sch. Sch. Sch. Sch 6 Sum of (c) thru (o) (m) / (b) (n * 0.%) 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6* $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 8 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 0 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 8 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 0 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 66 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 66. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 66. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 66. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 8 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 0 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 8 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 0 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Not Applicable $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6 Total Retail $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Notes: * In accordance with the Commission's Order dated September, 0 in Cause No. 6, Rates 6 and 6 have been rolled into Rate 6. ) This amount of forecasted usage relates to the kwh associated with new customers that have optedout of DSM which is to be excluded consistent with the rider. ) This amount is inclusive of the 0% portion relating to the reconciliation of lost margins for the period of January through December 0.

76 Petitioner's Exhibit No. C SECTION Existing Resources

77 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources In This Section NIPSCO serves customers with a portfolio of supplyside and demandside resources. The resources are designed to match the characteristics of NIPSCO s load. SupplySide Resources used to serve customers include,0 MW of coal, natural gas and hydroelectric generation, as well as wind generation purchases. DemandSide Resources include energy efficiency, energy conservation and demand response programs which help to reduce customers electricity consumption, or shift energy consumption from peak consumption hours to offpeak hours. As a member of MISO, NIPSCO has access to an efficient, liquid market. NIPSCO actively manages fuel supplies to its coal and gas generators. Meeting Customers Energy Needs As part of the planning process, NIPSCO identifies existing resources. These resources must be capable of meeting customers forecast capacity and energy needs. To be considered, the resources must be safe, reliable and cost effective. NIPSCO must also take into account the business climate in which we anticipate operating within. NIPSCO also operates within MISO, the Regional Transmission Organization ( RTO ), and is subject to North American Electric Reliability Corporation ( NERC ) standards. NIPSCO has registered with NERC as a Distribution Provider, Generator Owner, Generator Operator, Load Serving Entity, Purchasing Selling Entity, Resource Planner and Transmission Planner. NIPSCO is registered as a Balancing Authority, Transmission Operator and Transmission Owner in MISO. Each Registered Entity is subject to compliance with applicable NERC and Regional Reliability Organization ( RRO ), ReliabilityFirst, standards approved by Federal Energy Regulatory Commission ( FERC ). SupplySide Resources A Description of NIPSCO s Generation Portfolio NIPSCO s generation portfolio consists of the following sites: Bailly Generating Station ( Bailly ) Michigan City Generating Station ( Michigan City ) R.M. Schahfer Generating Station ( Schahfer ) Sugar Creek Generating Station ( Sugar Creek ) Norway and Oakdale Hydroelectric ( Norway Hydro and Oakdale Hydro ) Two purchase power agreements ( PPAs ) for wind generation ( Buffalo Ridge and Barton ). 9

78 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources NIPSCOOwned Supply Resource Bailly Bailly is located on a 00acre site on the shore of Lake Michigan in Porter County, Indiana. Bailly s two baseload units and one peaking unit came online over a sixyear period ending in 968. The units are equipped with various environmental control technologies, including FGD to reduce sulfur dioxide ( SO ), Selective Catalytic Reduction ( SCR ) and OverFire Air ( OFA ) systems to reduce nitrogen oxide ( NO x ) emissions as required by law. Future EPA regulations for coal ash and cooling water may impact Bailly Units 7 and 8. The individual characteristics of the Bailly units are provided on Table. Table Bailly Unit Information Unit 7 Unit 8 Unit 0 NET Output Min (MW) Max (MW) 60 0 Boiler Babcock & Wilcox Babcock & Wilcox Burners Cyclone 8 Cyclone Main Fuel Coal Coal Gas Turbine General Electric General Electric Westinghouse Frame D6 G W0G InService /0/6 7//68 /0/68 Environmental Controls FGD, SCR, OFA FGD, SCR, OFA NIPSCOOwned Supply Resource Michigan City Michigan City is located on a acre site on the shore of Lake Michigan in Michigan City, Indiana. Michigan City has one baseload unit, Unit. It is equipped with SCR and OFA systems to reduce NO x emissions as required by law. Unit burns low and medium sulfur coal blends to minimize SO emissions. Major upgrades for emissions controls are being evaluated for installation on Unit in order to comply with the Consent Decree, the Maximum Achievable Control Technology ( MACT ) and Cross State Air Pollution Rule ( CSAPR ). An FGD system is currently under construction for Unit ; the system will be in service in 0. EPA regulations for coal ash and cooling water may also impact Michigan City Unit. The individual unit characteristics of Michigan City are provided on Table. January, 0 agreement among the EPA, Department of Justice, Indiana Department of Environmental Management and NIPSCO to settle the NIPSCO EPA New Source Review Notice of Violation lodged with the United States District Court for the Northern District of Indiana Hammond Division ( Northern District ) (the Consent Decree ). The Consent Decree was placed on public notice in the Federal Register on January 0, 0. On July, 0, the Northern District issued an Order in Case No. :CV6 JVB approving the Consent Decree. The Consent Decree requires that NIPSCO operate all existing pollution control equipment and install additional pollution control equipment. 0

79 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Table Michigan City Unit Information Unit NET Output Min (MW) 0 Max (MW) 69 Boiler Burners Main Fuel Turbine Frame Babcock & Wilcox 0 Cyclone Coal General Electric G InService //7 Environmental Controls SCR, OFA NIPSCOOwned Supply Resource Schahfer Schahfer is located on approximately a,0acre site two miles south of the Kankakee River in Jasper County, near Wheatfield, Indiana. Schahfer is the largest of NIPSCO s generating stations. Schahfer s four coalfired baseload units and two gasfired simple cycle peaking units came online over an year period ending in 986. The Schahfer units are equipped with significant environmental control technologies, including FGD to reduce SO emissions and SCR, Low NO x Burners ( LNB ) and OFA systems to reduce NO x emissions as required by law. Unit burns low and medium sulfur coal blends and Unit burns lowsulfur coals to minimize SO emissions. As part of the Company s Clean Air Interstate Rule ( CAIR ) Compliance Phase I Strategy, FGD system upgrades to improve SO removal efficiency were completed for Units 7 and 8 in 00 and 009, respectively. Installation of a new LNB with OFA system was completed on Unit in 009. A new FGD plant on Unit was placed in service in 0. FGD installation on Unit is in progress and expected to be completed in 0. EPA regulations for coal ash and cooling water may also impact Schahfer. The individual unit characteristics of Schahfer are provided in Table.

80 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources NET Output Table Schahfer Unit Information Unit Unit Unit 7 Unit 8 Unit 6A Unit 6B Min (MW) 0 00 Max (MW) Boiler Babcock & Wilcox Foster Wheeler Combustion Engineering Combustion Engineering Burners 0 Cyclone 6 Pulverizers 6 Pulverizers 6 Pulverizers Main Fuel Coal Coal Coal Coal Gas Gas General Turbine Westinghouse Electric Westinghouse Westinghouse Westinghouse Westinghouse Frame BBR G BB BB D0 D0 InService //76 0//79 /8/8 //86 //79 //79 Environmental Controls FGD, SCR, OFA LNB, OFA FGD, LNB, OFA FGD, LNB, OFA NIPSCOOwned Supply Resource Sugar Creek Sugar Creek is located on a 8acre rural site near the west bank of the Wabash River in Vigo County, Indiana. The gasfired combustion turbines ( CTs ) and combined cycle gas turbine ( CCGT ) were available for commercial operation in 00 and 00, respectively. Sugar Creek was purchased by NIPSCO in July 008, and is NIPSCO's newest electric generating facility. Sugar Creek has been registered as a MISO resource since December, 008. Two CT generators and one steam turbine generator are operated in the CCGT mode. Environmental control technologies at Sugar Creek include SCR to reduce NO x, and dry low NO x ( DLN ) combustion systems. The individual unit characteristics of Sugar Creek are provided in Table. Table Sugar Creek Unit Information CT A CT B SCST NET Output Min (MW) Max (MW) 9 Heat Recovery Steam Generator Vogt Power Vogt Power Main Fuel Gas Gas Steam Turbine GE GE GE Frame 7FA 7FA D InService 6//00 6//00 6//00 Environmental Controls SCR, DLN SCR, DLN NIPSCOOwned Supply Resource Norway Hydroelectric and Oakdale Hydroelectric Norway Hydroelectric is located near Monticello, Indiana on the Tippecanoe River. The dam creates Lake Shafer, a body of water approximately 0 miles long with a maximum depth of 0 feet, which

81 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources functions as its reservoir. Norway Hydroelectric has four generating units capable of producing up to 7,00 kilowatts ( kw ). However, Norway Hydroelectric output is dependent on river flow and the typical maximum plant output is four MW. The individual unit characteristics of the Norway Hydroelectric are provided in Table. Table Norway Hydroelectric Unit Information NET Output Unit Unit Unit Unit Min (MW) Max (MW). InService Main Fuel Water Water Water Water Oakdale Hydroelectric is located near Monticello, Indiana along the Tippecanoe River. The dam creates Lake Freeman, a body of water approximately miles long with a maximum depth of feet, which functions as its reservoir. Oakdale Hydroelectric has three generating units capable of producing up to 9,00 kw. However, the Oakdale Hydroelectric output is dependent on river flow and the typical maximum plant output is six MW. The individual unit characteristics of the Oakdale Hydroelectric are provided in Table 6. Table 6 Oakdale Hydroelectric Unit Information NET Output Unit Unit Unit Min (MW) Max (MW)... InService Main Fuel Water Water Water NIPSCO PPAs Barton and Buffalo Ridge Wind NIPSCO is currently engaged in a 0year PPA with Iberdrola, in which NIPSCO will purchase generation from Barton. Barton, located in Worth County, Iowa, went into commercial operation on April 0, 009. The individual unit characteristics of Barton are provided in Table 7.

82 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Table 7 Barton Wind Information NET Output Per Unit (MW).0 Number of Units Total Output (MW) 0.0 InService 0/0/009 Main Fuel Wind NIPSCO is also engaged in a year PPA with Iberdrola, in which NIPSCO will purchase generation from Buffalo Ridge. Buffalo Ridge, located in Brookings County, South Dakota, went into commercial operation on April, 009. The individual unit characteristics of Buffalo Ridge are provided in Table 8. Table 8 Buffalo Ridge Wind Information NET Output Per Unit (MW). Number of Units Total Output (MW) 0. InService 0//009 Main Fuel Wind Total Resource Summary/Portfolio Composition Table 9 provides the net capacity, type of fuel burned and inservice dates for each of NIPSCO s existing generating units.

83 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Table 9 Existing Generating Units Unit NDC (MW) Type Typical Fuel InService Date Michigan City 69 Steam Coal May, 97 Bailly 7 60 Steam Coal November 0, 96 Bailly 8 0 Steam Coal July, 968 Bailly 0 Combustion Turbine Natural Gas November 0, 968 Schahfer Steam Coal December, 976 Schahfer 7 Steam Coal October, 979 Schahfer 6A 78 Combustion Turbine Natural Gas December, 979 Schahfer 6B 77 Combustion Turbine Natural Gas December, 979 Schahfer 7 6 Steam Coal April 8, 98 Schahfer 8 6 Steam Coal February, 986 Norway Hydro Hydro June 8, 9 Oakdale 6 Hydro Hydro November, 9 Sugar Creek CT A Combustion Turbine Natural Gas June, 00 Sugar Creek CT B Combustion Turbine Natural Gas June, 00 Sugar Creek SCST 9 Steam Natural Gas June, 00 Barton(PPA) 0 Wind Wind April 0, 009 Buffalo Ridge(PPA) 0 Wind Wind April, 009 Subtotal,7 Coal Subtotal 7 Natural Gas Subtotal 0 Hydro Subtotal 00 Wind Total System,0 NIPSCO and the MISO Wholesale Electricity Market NIPSCO's View of MISO's Generation Resource Pool MISO demonstrates an important trait key to NIPSCO s long term plans ongoing liquidity. MISO provides an enduring, relatively efficient market for marginal purchases and sales of electricity. There are many changes that affect MISO s generation resource pool. In addition to changes in MISO membership, there are many regulatory concerns that are being monitored. MISO Membership Entrants In 0, the integration of the new MISO South Region added over 8,000 miles of transmission, approximately 0,000 MW of generation capacity, and approximately 0,000 MW of load into the MISO footprint. MISO s increased scale will drive benefits through improved reliability and reduced regulation and spinning reserve requirements by consolidating balancing authorities and expanded options for generation commitment and dispatch from a more diverse set of fuel types. Exits Since First Energy, Duke Ohio and Duke Kentucky left the MISO and joined the PJM Interconnection LLC in 0, there have been no other exits from the MISO footprint. Potential Regulatory Impacts MISO has completed several studies on the impact of proposed EPA rules on its resource pool as well as conducted a joint survey with the Organization of MISO States ( OMS ). Approximately 0 percent of MISO s generation is sourced from coal units. It was estimated that about

84 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources half of MISO s coal generation pool would require additional controls to comply with EPA rules. Due to the high cost of retrofits, some coal units have announced their intention to retire. MISO reported at the February 0 Supply Adequacy Working Group meeting that the MISO North and Central Regions were facing a potential combined two GW shortage by 06, while the MISO South Region is projecting a five GW surplus. Transfer limits between the North/Central and South Regions are being addressed in several MISO Stakeholder forums. With the understanding that supply projections constantly change, NIPSCO is participating in MISO s continued efforts to conduct impact studies to address these issues. The discussion continues surrounding a national and/or Indianaspecific requirement related to the use of renewable resources. While NIPSCO has been proactive in securing renewable (wind) resources, any additional standards related to renewable energy would have an impact on future resource considerations. MISO currently has approximately,00 MW of wind generation within its footprint, and approximately,000 MW of wind generation in the active study queue. Operational issues concerning the amount of wind generation in the MISO queue and wind generation saturation are being addressed in various MISO Stakeholder committees. MISO is also accommodating demandside resources into its markets. Demandside resources come in many different forms including load modifying resources, emergency demand response, and behind the meter generation. Rules are being developed to afford these resources the same opportunity as traditional generation to the extent possible. NIPSCO supports the development of demand response as a resource and is an active participant in the Stakeholder process. Fuel Management for SupplySide Resources Coal Procurement and Inventory Practices Coal Acquisition Strategy NIPSCO employs a multifaceted strategy to guide coal supply and acquisition activities associated with the fueling of its coalfired units. This strategy includes: ) procuring the best coal for efficient unit operations; ) providing for environmental compliance; ) maintaining targeted inventory levels; ) ensuring delivery of coal in a timely and costeffective manner; and ) maximizing contractual flexibility by procuring coal types that can be used in more than one unit. Coal Procurement NIPSCO maintains a fiveyear baseline coal strategy. This strategy is used as a tool to determine appropriate coal purchases and inventory requirements. The fuel budget is dynamic and is updated on a periodic basis in response to system needs and market conditions. Coal Pricing Outlook Coal is generally sold in a bilateral market on a contract basis. Coal competes for market share against other fuels on a value in use basis, i.e., environmental externalities price in to the value of the commodity. Also, coal prices are linked with the supply and demand for coal, coal extraction costs, transport costs, and more generally with the overall supply and demand balance for energy. The discovery and exploitation of North American shale gas resources appears to have fundamentally altered the price relationship between coal and natural gas. Natural gas prices have declined and remain low while coal prices have continued to rise with higher mining costs, rail transport costs, and increased government regulations related to the mining of coal. 6

85 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Generally rising coal prices and declining Appalachia coal production have brought market share to the Illinois Basin, which is higher in sulfur than coal from other regions. Several new mines have opened up in the Illinois Basin, particularly in Illinois. With its higher sulfur content, Illinois Basin coal is viewed as being a potential export resource, but also available for domestic use with the installation of scrubbers. Southeast utilities are targeting Illinois Basin coal on a longterm basis as a replacement for Columbian and Central Appalachia coal. PRB tends to be lower Btu producing than coal from other regions. Domestic utilities that have traditionally not burned PRB coal are evaluating blending lower Btu PRB coal with Central Appalachian and Illinois Basin coals to reduce their overall fuel costs. Additionally, Asian demand for PRB coal continues to grow, as Japan is building new high efficiency coal units, and new coal plants are being built in Korea and Taiwan as they prepare to meet their future electricity demand. Similarly, Central Appalachian and Northern Appalachian coal continues to be exported due to the demand for metallurgical coal. Coal prices may also be impacted by regulations developed to protect miners, particularly in underground mines. These regulations may impact productivity and the increased compliance costs could be passed on to coal customers. However, this is not expected to be a major contributor to future coal prices. Lastly, although coal still enjoys an economic advantage over natural gas, current and future environmental regulations may jeopardize. With government regulation in the mining industry, environmental regulations impacting air and water, and the potential of the government declaring fly ash a hazardous waste, this economic advantage continues to erode. As such, NIPSCO will continue to monitor coal prices in subsequent planning activities. NIPSCO Coal Pricing Outlook NIPSCO currently procures coal from three geographic regions in the United States, the PRB, Illinois Basin, and Northern Appalachia. Market demand for Illinois Basin coal has increased for reasons stated above, and therefore, prices have steadily risen. Northern Appalachia coal used by NIPSCO as a blend fuel in two of its cyclone units is being exported as a near metallurgical coal. This coal has a robust market overseas and is consequently priced accordingly. Also, the price of Northern Appalachia coal is expected to remain volatile due to its higher heat content and its international appeal compared to Illinois Basin and PRB coal. Pricing for PRB coal remained relatively stable in 0. The PRB pricing is expected to gradually escalate in 0 due to strong demand as a result of recent inventory depletion caused by exceptional winter weather conditions in late 0 and early 0. Coal and Issues of Environmental Compliance Depending on the manner and extent of current and future environmental regulations, NIPSCO s coal purchasing strategy will continue to be to meet these environmental requirements. Maintenance of Coal Inventory Levels NIPSCO has an ongoing strategy to maintain a stable, controllable coal inventory. NIPSCO reviews inventory target levels annually and makes adjustments in anticipation of changes in supply availability relative to demand, transportation constraints and unit consumption. NIPSCO modifies target inventory levels on a unitbyunit basis depending on the unit consumption, transportation cycle times, reliability of coal supply and station coal handling operations. 7

86 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Forecast of Coal Delivery and Transportation Pricing To ensure the delivery of fuel in a timely and costeffective manner, NIPSCO negotiates and executes transportation contracts contemporaneously with coal supply contracts and evaluates all fuel procurement options on a delivered basis, which includes a complete evaluation of all potential logistical issues. Coal deliveries, excluding exceptional weather conditions, have become more fluid in all geographic regions, particularly shipments originating in the PRB region due to infrastructure improvements. Railroads will need to continue making major investments in infrastructure and capital equipment to ensure timely deliveries and ease railroad congestion. Transportation rates continue trending upward and one of the driving factors is the volatility of diesel fuel. Railroads incorporate fuel surcharge mechanisms in transportation agreements to allow for recovery of the cost of the diesel fuel. NIPSCO verifies that all fuel surcharges imposed by the railroads meet the contractual terms of the transportation agreement negotiated by the parties. NIPSCO Transportation Pricing Outlook NIPSCO has limited rail options at the origin and destination for most of its transportation moves, and is further disadvantaged due to its geographical location. Not only is rail transportation limited, other transport modes (trucking and barging) are not feasible at this time. Further, NIPSCO s largest generating station, Schahfer, is served by only one railroad. All coal delivered by this railroad to Schahfer is transported under escalated transportation rates and onerous fuel surcharges. Increased rail competition, particularly at Schahfer, would mitigate these costs. A north/south Indiana railroad providing direct access to Schahfer, and potential access to other industry in northern Indiana, and the Port of Indiana, would allow Schahfer direct access to burn Indiana coal, and also be a possible economic stimulus for the northern region. Currently, the interchange for Indiana coal transported to Schahfer is near Chicago, adding miles to the transport route, increasing the delivered cost of Indiana coal to the station. PRB and Illinois Basin transportation rates currently, and in the near term, have remained relatively stable. Fuel surcharges continue to fluctuate with the changing West Texas Intermediate Crude pricing. Coal Contractual Flexibility, Deliverability and Procurement Coal purchasing contracts are typically three to five years in term. Spot purchases are made on an asneeded basis in response to inventory fluctuations. In an effort to avoid inventory fluctuations and accommodate unit maintenance outages, most coal types under contract can be used in more than one unit. The fuel blending strategy can also be adjusted to conserve a particular type of coal if supply problems are being experienced. Both coal and rail transportation contracts have force majeure clauses, which cover events beyond the reasonable control of the party affected that prevent the mining, processing, or loading of coal at the mines, receiving, transporting, or delivering of coal by the rail carriers, or accepting, unloading, or burning of coal at the generating stations. Natural Gas Procurement and Management Sugar Creek Generation Station NIPSCO currently procures natural gas for its Sugar Creek Generating Station using a natural gas supply contract with an energy manager who delivers to the interstate pipeline interconnect at the station, or other locations along the interstate pipeline upon request of NIPSCO for balancing purposes. NIPSCO currently holds firm capacity on the interstate pipeline, Midwestern Gas 8

87 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Transmission Company. NIPSCO releases the capacity to the energy manager. The contract has provisions to purchase next day and intraday firm gas supplies to serve the daily needs of the facility. The current energy management contract is set to expire on March, 0. NIPSCO nominates and balances the gas supply needs of the Sugar Creek Generating Station. A portion of the gas supply for Sugar Creek is financially hedged with the intention of smoothing out market price swings over a specific time period. The volatility mitigation plan consists of purchasing monthly NYMEX Henry Hub natural gas contracts that settle at expiration. Bailly, Michigan City and Schahfer Coal Units and Combustion Turbines The coal units at NIPSCO s Bailly, Michigan City and Schahfer stations, and combustion turbines at Bailly and Schahfer are located within the NIPSCO natural gas local distribution company service territory. NIPSCO maintains a separate contract for firm delivered natural gas supply and energy management for these units. The contract has provisions to nominate nextday usage based on the expected usage of each generating station. The actual usage is balanced daily and balancing is the responsibility of the energy manager. Electric Generation Gas Supply RFP Process NIPSCO conducts two separate RFPs for the electric generation firm natural gas supply, one for the Sugar Creek facility and a separate one for the coal units and combustion turbines. The RFP process may be done on a seasonal or annual basis depending on the current contract length and supplier agreement. The process includes qualifying potential suppliers, customizing the RFP based on nearterm system needs and gas supply trends. Suppliers are chosen based on the overall value of the package and ability to serve the needs of the facility. To date, NIPSCO has entered into electric generation gas supply agreements that extend no longer than one year but is always evaluating the value and benefits of longer term agreements. NIPSCO Water Usage Profile NIPSCO is committed to serving as responsible stewards of natural and environmental resources. As part of that commitment, NIPSCO strives to conserve the fresh water resources of the Great Lakes and Mississippi River Basins. Both coalfired and CCGT units use water as the working medium. NIPSCO s units withdraw water both to generate steam and to provide cooling water for condensers. A brief description of water usage in the processes follows. CoalFired Units ) Purified water is pumped through pipes into the boilers. There, temperatures of up to,000 degrees Fahrenheit turn the water into steam. ) The pressurized steam is then directed to the turbines. The steam spins the turbines, which turn an electric generator, thereby generating electricity. ) The steam is then directed into a condenser, where it is cooled by the cooling water system. The condenser dissipates the heat and converts the steam back into liquid water. ) For units with cooling towers such as Schahfer and Michigan City, water is evaporated from the process to cool the circulating water prior to it being returned to the condenser. The evaporated water is emitted from the unit as steam, and the remainder of the water is either recirculated or discharged into the source body of water. For units without cooling towers such as Bailly, nearly all of the cooling water withdrawn is returned to its source. See Figure. 9

88 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Figure OnceThrough Cooling System CoalFired Unit 007 Electric Power Research Institute, Inc. CCGT Units A CCGT facility such as Sugar Creek generates electricity in two cycles. ) Electricity initially is generated using a gas turbine. ) The waste heat from the gas combustion process is then used to make steam, thereby generating additional electricity via a steam turbine. This last step enhances the overall efficiency of the electric generation. The steam leaving the turbine is then directed into a condenser, where it is cooled by the cooling water system. The condenser dissipates the heat and converts the steam back into liquid water. The cooling water is pumped through mechanical draft cooling towers, and returned to the source waterway. Some steam is lost through the cooling towers. See Figure. 0

89 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Figure Cooling System CCGT Unit 007 Electric Power Research Institute, Inc. Natural and Regulatory Environment The Bailly and Michigan City Generating Stations sit on the shore of Lake Michigan in the Great Lakes Basin. The electric generation plants draw their water from Lake Michigan and one of its tributaries. Like all water withdrawals from Lake Michigan, Bailly s and Michigan City s usage is heavily regulated by international, federal, and state law. The primary guiding document is the Great Lakes Compact ( Compact ), an agreement that has been ratified by the United States, two Canadian provinces, and eight Great Lakes States. Indiana statutes passed pursuant to the Compact require large existing users to document their usage and to implement water conservation programs. New uses inside the Great Lakes Basin are closely scrutinized and new uses outside the basin are generally prohibited. NIPSCO is fully supportive of the Great Lakes Compact, and, in fact, worked with the State of Indiana to develop ways to implement the Compact. NIPSCO operates its generating stations in compliance with the Compact and Indiana wateruse laws. The Schahfer and Sugar Creek Generating Stations are located on the Kankakee and Wabash Rivers, both of which eventually flow into the Mississippi River. The State of Indiana comprehensively regulates the consumptive use of water in the Kankakee River Basin. NIPSCO has obtained a permit from the Indiana Department of Natural Resources for water withdrawals from the Kankakee River. NIPSCO Water Usage As noted above, steam turbine generating units use water in their processes. The majority of this water, however, is either recirculated or returned to the source body of water. The following table shows the estimated water usage during 0. See Table 0.

90 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Table 0 0 Water Usage Generating Station Million Gallons / Day Withdrawal Return Consumption Michigan City Bailly Schahfer... Sugar Creek Total As is clear from the data above, coalfired units without cooling towers like Bailly withdraw the most water in their processes. These units, however, also return proportionately more water to the source. In 0, Bailly returned 99 percent of the water it withdrew. Water Usage for SelfBuild Options See Engineering Study (CONFIDENTIAL Appendix K). Operations Management and Dispatch Implications for SupplySide Resources Considerations for Environmental Compliance As previously noted, NIPSCO entered into a Consent Decree with the EPA requiring NIPSCO to reduce emissions over a defined period of years through primarily capital improvements on existing generation resources. In addition, an EPA mandated MACT rule required NIPSCO to design and obtain approval to meet new air emission standards. In order to meet the terms of the Consent Decree and the MACT requirements, NIPSCO utilizes predictive tools to predict effluent emission levels based on unit operations, as well as determine levels of output for the individual generators that can help reduce the overall emissions. Based on output from the predictive tools and current operations statistics, NIPSCO also has the ability to modify unit operations and unit offers for dispatch into MISO as needed in order to remain environmentally compliant. NIPSCO DemandSide Management Strategy NIPSCO has adopted a cultural change that encourages energy conservation and efficiency. NIPSCO actively promotes the benefits of energy efficiency to its employees and customers. Employees, especially those with direct customer contact, are encouraged to promote conservation. 0 Core Programs Residential Lighting Program This program is designed to identify and implement the best approach to achieve the participation and energy saving goal for ENERGY STAR ( ES ) ESqualified lighting products by each participating utility by program year. The Residential Lighting Program goal is to increase the penetration of ES qualified lighting products utilized in residences located in the service territory of each participating utility.

91 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Residential Home Energy Assessment Program This program is designed to generate energy savings for qualifying residential customers by providing lowcost energy efficiency measures and improvement recommendations tailored to customer homes. Key objectives include ) help customers identify opportunities to better manage their energy use, and ) maximize costeffective savings via direct installation of lowcost energy savings. The goals of the Residential Home Energy Audit Program are to produce long term, cost effective electric savings in the residential market sector by helping customers analyze and understand their energy use, recommending appropriate weatherization measures, and facilitating the direct installation of specific lowcost energy saving measures. Residential Income Qualified Weatherization Program This program is designed to generate energy savings for qualifying lowincome residential customers by providing energy efficiency measures and improvements tailored to participating customer homes as well as providing education to reduce energy consumption. Key objectives include ) help customers identify opportunities to better manage their energy use, ) maximize energy savings via direct installation of energy savings measures, ) leverage and develop local resources such as auditors and installers, ) leverage opportunities for collaboration and coordination of weatherization measures, provided by gas utility low income weatherization programs as well as benefits provided from other local, state and federal funding sources, and ) identify significant health and safety concerns of the homes that impact eligibility. Goals of the Income Qualified Weatherization include producing long term energy and demand savings in the residential market sector through ) the installation of energysaving measures, ) education of consumers during the audit process on ways to reduce energy consumption ) the identification of opportunities for weatherization measures, ) the professional installation of weatherization and efficiency measures, and ) diagnostics of pre and postinstallation. Energy Efficient Schools (School Education Kits and School Audit) Program This program is designed to generate costeffective electric savings through an elementary education and takehome kit program as well as a school energy audit program for K schools. Key objectives include ) help customers identify opportunities to better manage their energy consumption, ) maximize costeffective savings via provision of takehome kits of lowcost energy, savings measures to students, ) promote the installation of energy efficient measures and operating procedures in K school buildings, and ) leverage opportunities for collaboration and coordination of school programs provided by gas utilities. The Energy Efficient Schools Program goal is to produce cost effective electric savings by influencing students and their families to focus on conservation and the efficient use of electricity. Another component of the program goal is to produce electric savings by providing technical assistance to schools in the form of building energy audits as well as provide access to prescriptive rebates programs. The program consists of two components ) a school education program for both public and private K students attending schools served by NIPSCO, and ) a school technical assistance program that provides building energy audits to identify operation and capital improvements to school facilities served by the participating utilities.

92 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Commercial & Industrial Prescriptive Rebates Program This program is designed to assist commercial and industrial customers in reducing electrical energy consumption and costs. The program provides a prescriptive incentive structure that rewards with monetary incentives based on the installation of energy efficient equipment upgrades such as energy efficient light fixtures and ballasts as well as energy efficient pumps, motors and variable speed drives. 0 Core Plus Programs Residential Weatherization Program This program is designed to produce longterm costeffective electric and gas savings in the existing residential buildings market. This program has been designed to provide services, such as insulation, and duct sealing, to NIPSCO electric only customers, NIPSCO combination gas and electric customers and NIPSCO gas customers receiving electric service from Indiana Michigan Power ( I&M ). Customers typically purchase and install energy efficiency improvements and services when they are educated on opportunities, costs and benefits. This program is currently implemented by CLEAResult. Residential Energy Conservation Program This program is designed to significantly increase customer engagement across the selected population within NIPSCOs service territory, for the purposes of ) largescale, measurable and costeffective energy savings, over a one year period, ) increased program participation in select NIPSCO Energy Efficiency and DSM programs, and ) increased customer satisfaction through an improved customer experience and engagement. This program is currently implemented by Opower. Residential MultiFamily Direct Install Program This program is designed to reduce energy consumption for tenants of multifamily units. The program is designed to affect the installation of energy efficient, highperformance water fixtures (i.e., showerheads and faucet aerators) and Compact Fluorescent Lamps ( CFLs ) in rental units, condominiums, and mobile homes to substantially reduce the consumption of hot water and electrical consumption. This program is currently implemented by CLEAResult. Residential New Construction Program This Program provides incentives to offset a portion of the incremental costs incurred to meet the revised ES home certification program and exceed the performance of the upcoming adoption of the 009 International Energy Conservation Code ( 009 IECC ) in Indiana. The Program provides builders with education about energy efficient construction and the ways to meet and exceed them. Incentives are available to builders for both gas and electrically heated homes. This program is currently implemented by CLEAResult. A/C Cycling Program This voluntary program is available to NIPSCO electric customers with air conditioning units of five tons or less. A load control switch will be installed near the customer's central air conditioning unit. The radiocontrolled switch will allow NIPSCO to cycle the customer's air conditioning compressor on and off for short periods of time during peak usage demands. Cycling occurs only during the weekdays during the

93 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources summer. Customers participating in the program receive a $0/month credit on their bills from June September. This program is currently implemented by GoodCents. Residential Appliance Recycling Program This program is designed to focus on older, less efficient electric appliances and offers cash incentives to recycle old, inefficient refrigerators and freezers. Customers receive a cash incentive for each functioning refrigerator and freezer, and the vendor hauls them away at no cost to be dismantled and recycled in an environmentally responsible way. This program is currently implemented by Appliance Recycling Center of America ( ARCA ). Residential Energy Efficiency Rebate Program The Energy Efficiency Rebate Program provides cash rebates to NIPSCO residential customers who purchase select energy efficient equipment including furnaces, boilers, etc. The Program promotes the purchase of high efficiency home appliances such as heat pumps, and electronically commutated motors with a design that is flexible to adjust to constantly changing marketplace demands. This program is currently implemented by CLEAResult. Commercial and Industrial Custom Program Unique efficiency opportunities for the commercial and industrial customer are developed through a custom approach for site specific measures and prescriptive custom measure that are a standard established maintenance effort, or a measure unique to the commercial and industrial sector that is consistent in application and savings are transferable to nonsite specific locations by previous tests or a site test valid for other locations. The incentive is paid as $/kwh saved, for site specific system or equipment efficiency improvement. This program is currently implemented by Franklin Energy. Commercial and Industrial New Construction Program Construction firms routinely instruct their design teams to produce energy efficient, high performing buildings, and architectural and engineering firms have the technical expertise and adequate compensation to respond to market demand. There is a marketdriven opportunity to achieve energy efficiency and transform design and equipment specification practices at minimal cost when new buildings are designed and constructed, and when existing ones are renovated or expanded. The fundamental energy impact of early building design decisions may continue for its full life. Equipment choices establish energy consumption patterns for twenty to thirty years, until that initial equipment fails. This program provides, or cofunds, technical services and incentives to influence the energy efficiency of individual buildings and, over time, to change standard building design and equipment specification practices. This program is currently implemented by Franklin Energy. Commercial and Industrial Guest Room Energy Management Program The Guest Room Energy Management ( GREM ) Program aims to achieve energy savings in hospitality facilities by offering customers direct installation of GREM controls for a nominal copayment. GREM saves energy by reducing heating and cooling energy when the room is unoccupied. Eligible measures include: GREM controllers, vending machine misers, CFLs, bathroom occupancy sensors, low flow showerheads, and aerators. Services include an assessment of the facility and direct installation of the measure. This program is currently implemented by Franklin Energy.

94 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Commercial and Industrial Small Business Direct Install Program The Commercial and Industrial Small Business Direct Install ( SBDI ) Program is a direct installation approach to penetrate the small commercial customer market, based on evidence that small customers do not have the expertise, time or available capital to make efficiency upgrades. This approach provides direct install measures for the customer and virtually eliminates the barriers of participant hassle and search costs. Direct installation programs can be ramped up quickly to achieve immediate, costeffective savings. These programs also ensure that smaller customers receive program benefits consistent with their contribution to the energy efficiency program. This program is administered by Franklin Energy. The 0 projected energy savings are summarized by program in Table. Table 0 Projected Energy Savings (MWh) Programs Savings 0 Core Programs Residential Lighting Program 6,6 Residential Home Energy Assessment (HEA) Program 8,08 Residential Income Qualified Weatherization (IQW) Program,7 Energy Efficient Schools Program School Education Kits,77 School Audit, Commercial and Industrial Prescriptive Rebate Program 6,8 0 Core Plus Programs Total Core Program 86,6 Appliance Recycling Program,97 Residential Energy Efficiency Rebate Program,7 Weatherization Program 78 Direct Install Program (Multifamily),90 Conservation Program,98 Residential New Construction Program A/C Cycling Program NonResidential New Construction Program 6,60 C&I Custom Incentive Program 9,79 Small Business Direct Install Program 7,80 Guest Room Energy Management Direct Install Program 6,06 Total Core Plus Program,70 Total 0 Electric DSM Program 9,8 6

95 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources 0 DSM Programs On March 7, 0 Senate Enrolled Act 0 became law which, among other things, removed the requirement that utilities meet the goals established by the Commission in the Phase II Order and eliminated the Core programs offered by a single TPA. As a result, NIPSCO chose to continue offering its customers DSM Programs in 0 and in early June filed its proposed 0 DSM Plan with the IURC. The following is a brief description of NIPSCO proposed 0 Residential and C&I programs. Residential Lighting Program The Residential Lighting Program will provide incentives and marketing support through retailers to build market share and usage of ES and other energy efficient lighting products. The program will target the purchase of lighting products through instore promotions as well as special sales events. Customer incentives facilitate the increased purchase of highefficiency products while instore signage, sales associate training and support makes provider participation easier. Residential Elementary Education Program The Residential Elementary Education Program provides energy education to students, providing an excellent opportunity to influence energy behavior over the longterm. The program will target elementary school students, providing curriculum and inclassroom education support along with a takehome kit that raises awareness about how individual actions and lowcost measures can provide significant reductions in electricity, natural gas and water consumption. Residential Low Income Weatherization Program The Residential Low Income Weatherization Program, which will be available to homeowners as well as renters with landlord approval, will provide assistance to lowincome customers to reduce their energy consumption by installing energy efficient technologies and measures in their homes. In addition, NIPSCO is including a budget to allow for remediation of health and safety measures that impede the ability to complete weatherization. This could include warped door frames that impede effective door sealing, broken windows, or even a small hole in the roof that, once repaired, allows the weatherization work to be completed. NIPSCO is pleased to be able to offer this component to the program as it will decrease the number of homes for which weatherization previously could not be completed due to these issues. In addition, many of the repairs themselves will assist the customers in being more energy efficient, so it makes sense to include the repairs as part of the DSM program. As a part of this program, NIPSCO is proposing to collaborate with Holistic Community Coalition, a 0(c)() organization in Lake County, Indiana, that has successfully developed its own program infrastructure to more effectively serve the lowincome customers of Lake County. The organization hires individuals from the local area, gives them training in weatherization skills, and then utilizes these individuals to weatherize homes in the local area. The organization has a thorough communication plan whereby clients receive information prior to, during, and after the weatherization visit is completed. During the home visit, the technician will explain all of the steps a homeowner can take in being energy efficient as well as installing energy efficiency measures, which could include CFLs, pipe wrap and water saving devices. A few days after the home visit, there will be a follow up call to the client to see if they 7

96 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources have any questions and to determine if they have any issues with any of the installed items. In addition to being a locallybased resource understanding the unique needs of the communities it serves, the Holistic Community Coalition has direct access to a large network of churches, which will assist the organization in reaching eligible customers. While this provides a unique outreach activity, customers do not need to be a member of any particular religion in order to participate in the program. The program will actively solicit senior citizen participation and promote the benefits of an energy efficient home. Additionally, because of the direct connection between a church and its congregation, a program that is actively promoted by the church leadership will likely lead to increased participation. As with its other programs, NIPSCO will have a thorough EM&V of the program, which will enable NIPSCO to assess the benefits of this program as well as possibly expand those benefits to its Low Income Weatherization program as a whole. Residential Home Energy Assessment and Weatherization ( HEAW ) Program The Residential HEAW Program will utilize a twophase approach to capture savings in existing singlefamily homes. Phase I: Home Walkthrough Energy Assessment the implementation contractor will provide customers a one hour walkthrough audit of their home and provide a report outlining opportunities to improve energy efficiency. The report will prioritize potential improvements, estimate their cost after incentives are applied and estimate the resulting energy cost savings and payback timeframe. The implementation contractor will also install appropriate lowcost measures, including CFLs, light emitting diode ( LED ) lamps, pipe wrap and watersaving devices as a part of the assessment. Phase II: Weatherization Services the assessor will work with the customer to determine a schedule by which the program will followup to provide ongoing assistance with program offerings applicable to the customer. While the default schedule will be 0, 60, 90 and 80 days after the assessment, the follow ups will be tailored to suit individual needs. For example, the assessor may schedule eligible customers for duct sealing services within 0 days of the assessment and follow up to gain consent to proceed with insulation and air sealing after 60 days, as appropriate and agreed upon by each customer based on their individual needs. Customers will be able to choose from prequalified contractors, which will be selected based on their level of expertise, experience with previous implementation of NIPSCO s Home Weatherization Program and itemized pricing for specified improvements. Utilizing a preapproved group of contractors to provide turnkey direct installation services will improve installation rates, while still allowing for customers to have choices. This provides a distinct customer benefit as the time and effort required to select and manage contractors is a key barrier to customers implementing improvements. Further, it will allow NIPSCO to closely manage customer service and quality control to ensure measures are properly installed. Under the new design the program administrator will be the same for both the home assessment and weatherization portions of the program. This should improve both the customer experience in terms of having a single point of contact as well as improve the efficiency of program delivery. Residential Energy Efficiency Rebate Program The Residential Energy Efficiency Rebate Program will influence the purchase and installation of highefficiency heating and cooling technologies, through a combination of market push and pull strategies that stimulate demand while simultaneously increasing market provider investment in stocking and promoting high efficiency products. The electric program will promote premium efficiency air conditioners and heat 8

97 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources pumps that have highefficiency, electrically commutated motors ( ECMs ), ECM retrofits, air conditioner and heat pump tune ups, ductless heat pumps, heat pump water heaters and programmable thermostats. Residential New Construction Program The Residential New Construction Program will continue to recruit and educate selected builders and their trade allies on the benefits associated with energyefficient homes and building practices designed to improve upon baseline efficiency. Builders will be provided with financial incentives to encourage the installation of premiumlevel efficient equipment and the use of better building techniques. As in NIPSCO s current program, the incentives will be based on the overall efficiency of the home as indicated by the Home Energy Rating System ( HERS ) Score. The program will identify and recruit key builders who are not consistently (or seldom) building homes to meet the desired HERS Scores. Builders who choose to participate in the program will gain access to cashback incentives designed to cover approximately 0 percent of the cost to upgrade and certify each home. In addition, they will be provided with personalized training on marketing energy efficiency to customers and energy efficient building standards. Residential Home Energy Conservation Program The Residential Home Energy Conservation Program is designed to significantly increase energy efficient behavior through increased customer engagement across a selected population within the NIPSCO service territory. Home Energy Reports are sent to a select population within the NIPSCO territory ) to show largescale, measurable and costeffective energy savings over a one year period, ) to increase program participation in select NIPSCO energy efficiency and DSM programs, and ) to increase customer satisfaction through an improved customer experience. The Home Energy Report compares usage in one home that received the report to another comparable customer that did not receive the report (the control group). Any difference in usage over the same time period is counted as kwh savings for that particular period. Air Conditioner (A/C) Cycling Program The A/C Cycling Program is a voluntary program available to NIPSCO s residential and C&I customers with air conditioning units of five tons or less. A load control switch is installed near the customer's central air conditioning unit. The radiocontrolled switch allows NIPSCO to cycle the customer's air conditioning compressor on and off for short periods of time during peak demands. Cycling typically occurs on the hottest summer days during the week and events are not called on weekends or holidays. Participating customers receive a $0/month credit on their bills from June through September. NIPSCO is proposing to maintain and provide the incentive to the current customers in the program, but not offer new enrollments in 0. C&I Custom Program The C&I Custom Program offers unique efficiency opportunities developed for the C&I customer through a custom approach for site specific measures and custom measures. Incentives are paid as $/kwh saved for site specific systems or equipment efficiency improvements. C&I Prescriptive Program The C&I Prescriptive Program is designed to assist C&I customers in reducing electric energy consumption and costs. The program provides monetary incentives for specific measures based on the 9

98 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources installation of energy efficient equipment upgrades such as energy efficient light fixtures and ballasts as well as energy efficient pumps, motors and variable speed drives. C&I Small Business Direct Install Program The C&I Small Business Direct Install Program is used to penetrate the small commercial customer market based on evidence that small commercial customers do not have the expertise, time, or available capital to make energy efficiency upgrades. This direct install approach of measures including lighting and water saving measures virtually eliminates the barriers of participant hassle and search costs. An added benefit of the program is that it introduces this market to other program offerings and encourages them to pursue additional energy efficiency investments through the Prescriptive and Custom programs. School Audit Direct Install Program The School Audit Direct Install Program is currently offered as a Core program and has been highly successful in NIPSCO s service territory. It is designed to educate school officials on the benefits of energy efficiency and the savings associated with the installation of recommended energy saving measures and operational improvements as well as providing the direct installation of certain measures. At the conclusion of the energy assessment, the school is presented with a detailed report that demonstrates ways to save energy and money through potential incentive dollars that may be available from other NIPSCO program offerings. The direct install measures will include items such as vending machine controllers, CFLs, occupancy sensing power strips and lighting occupancy sensors. 0

99 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources The 0 projected energy savings are summarized by program in Table. Table 0 Projected Energy and Demand Savings (MWh/kW) Program Residential Programs Savings Residential Lighting Program,7/7,7 Residential Elementary Education Program,9/,70 Residential Low Income Weatherization Program 68/78 Residential Home Energy Audit and Weatherization Program,6/,69 Residential Energy Efficiency Rebate Program,0/79 Residential New Construction Program 87/ Residential Home Energy Conservation Program,000/6,9 C&I Programs Total Residential Programs 9,8/9,9 C&I Custom Program,000/,6 C&I Prescriptive Program 0,000/7,670 C&I Small Business Direct Install Program 6,000/9 School Audit Direct Install Program / A/C Cycling Program (Residential and C&I) 0/7,8 Total C&I Programs 70,/7,9 Total 0 Electric DSM Program 9,60/7,9 The NIPSCO DSM 0 avoided cost is $7,70,06 with participant bill reduction of $60,69,06, participant incentive of $8,80,00, program cost borne by participant of $6,8,0. NIPSCO DSM has a negligible impact on T&D requirements based on the 0 program plan. The proposed 0 DSM program designs and projected savings are not final; however NIPSCO does not expect them to change drastically. 060 DSM Resources NIPSCO engaged the services of Applied Energy Group ( AEG ) to identify the DSM measures that would be appropriate for the NIPSCO territory based on census information, population growth, age of the housing stock, and potential technology existing today and in future, potential savings associated with these various measures and then assess the likely level of participation. The results of the DSM study are included in Appendix G. NIPSCO then had these various measures input into the DSMore Model to start the screening process. An initial screen of each of these measures was performed through assessing the benefits (or avoided

100 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources costs) against the costs of the measure. As such, if the benefits of a measure did not outweigh the costs, the measure was dropped from consideration. As measures pass the initial screen, they were then aggregated by end use (heating, cooling, lighting) and then by sector (residential, commercial, and industrial). See Table. Appliances Table End Use Measures Aggregated by Sector Measures Residential Commercial Industrial Cooling Electronics Exterior Lighting Food Preparation Heating Interior Lighting Miscellaneous Motors Office Equipment Process Refrigeration Space Heating Ventilation Water Heating These aggregated end use sectors (comprised of various measures) were then run through the industry standard tests to determine whether they would pass the initial screen of Total Resource Cost ( TRC ) test and Utility Cost Test ( UCT ) scores. These tests are described in greater detail in Table. The following table shows the results of the standard DSM tests. It is important to note that the DSM forecast was completed using the assumption that no industrial customers would elect to opt out of the program as provided for in SEA 0. Table DSM Standard Test Results Description Utility Test TRC Test RIM Test Societal Test Participant Test Residential HVAC Residential Lighting Residential Other C&I HVAC C&I Lighting C&I Other C&I Process

101 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources The 060 projected cumulative savings (MWh) for aggregated end use sectors are in Table. Energy Savings (MWh) Residential Lighting Residential HVAC Table Projected Cumulative Savings (MWh) Residential Other C&I Lighting C&I HVAC C&I Other C&I Process 06 9,067, 8,6 8,9,00 9,7 6,90 6,6 07 8,86,7,088 0,7 9,09 0,8,77 7, ,00,8,99,08,67 0,7 7,79 78, ,09,98 6, 66,080,89 0,06 90,70 8,9 00 7,8 7,96,96 7, 0, 7,96 08,0 7, ,8 0,0,600 6,7 9,0 6,60 6,6 6,7 0 7,877,6 0,0 06, 7,676 67,9, 6, ,69,88 9,76 7,7 66,7 7,9 6,9 698,8 0 77,9 7,067 67,9 90,0 77,07 76,90 80,69 786,7 0 79,7 9,6 7,97 9,70 87,76 8,67 97,6 870, ,86,98 8,70 69,9 98, 86,7, 96, ,0,6 9,9 0,88 0,007 9,69,0,08, ,8 7,000 98,697,6,6 96,0 0,,, 09 6,6 9,0 06,80 90,6, 98,9 66,7,0, 00,689,6,8,80,669 98,79 8,7,,99 0,66,77,0 8,9,6 97,6 00,78,0,06 0 6,7,8,8 9,6 6, 97,00 8,80,69, 0,08 7,0,6 6,69 7,80 96,90,8,,6 0 7,0 8,97 0,69 669,6 80,7 97,970 0,89,606,7 0,6 9,98 7,09 668,6 89,67 00,976 67,,68, Total

102 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources The 060 projected annual costs (0$) for aggregated end use sectors are in Table 6. Annual Cost ($) Residential Lighting Residential HVAC Table 6 Projected Annual Costs (0$) Residential Other C&I Lighting C&I HVAC C&I Other C&I Process 06,0,68,8,66,8,7,87,0,899,86,80,09,8,08 8,,88 07,08,96,7,,87,080,9,66,0,8,68,,0,06 7,6,779 08,89,9,,0,6,60,6,0,9,7,66,69,80,9 7,667,78 09,9,7,,9,79,690,8,,706,,7,088,7,89 8,6, 00,86,7,9,08,,07,89,8 6,9,89,86,70,76,899 7,6,0 0,0,0,8,7,997,6,8,9 7,99,9,8,9 8,0,,,76 0,70,,,698,8,69,68,7 8,,,8,79 7,96,,68, 0,70,87,8,760 7,77,78,06,98 8,8,8,9,76 8,80,8,87,60 0,6,,67,07 8,87,88,80,6 0,8,900,0,68 8,0,96 9,7,98 0,6,6,0,9 9,6,9,,77,,06,,7 9,76,0 7,0, 06,70,0,7, 0,8,0,69,88,767,98,7,087,808,06 6,99,09 07,6,99,88,66 0,77,767,06,77 7,9,07,,66,79,60 66,9,6 08,8,809,0,69 0,6,9,0,97 7,79,,77,8,98,0 67,77,9 09,,,68,,076,,99,7 9,88,,87,78,8, 7,96,9 00,,7 6,090,,98, 6,6,8,6,96,99,60 7,9, 79,8,989 0,0,06 6,60,89 7,07,0 7,,98,8,8,0,97,000,98 89,67,0 0,9,0 8,79,69 6,086,8 7,96,6,890,078,7,9,8,68 9,,9 0,9,899 8,9,0 6,79,76 8,70,9,8,6,7,7,9,69 9,669,89 0,,68 9,67,66 7,9,7,76,0,00,0,689,87,96,80 0,88,8 0,,9 8,968,96 7,878,76,6,9,,6,89,97,7,89,08,90 Total Avoided costs account for energy, capacity, T&D and ancillary. The annual avoided cost calculation include: ) the costbased proxy for electric generation capacity (annualized $/kw) multiplied by the expected annual demand savings attributed to each measure adjusted by the applicable future year escalation factor; ) estimated transmission capacity cost ($/kw) multiplied by the expected annual demand savings attributed to each measure adjusted by the applicable future year escalation factor; ) estimated distribution capacity cost ($/kw) multiplied by the expected annual demand savings attributed to each measure adjusted by the applicable future year escalation factor; ) estimated annual average energy cost ($/kwh) multiplied by the expected annual energy savings attributed to each measure adjusted by the applicable future year escalation factor; and ) estimated MISO Ancillary Charges ($/kwh) multiplied by the expected annual energy savings attributed to each measure adjusted by the applicable future year escalation factor. See Tables 7 through 9 for avoided cost calculation assumptions. See Table 0 for 060 projected cumulative avoided costs.

103 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Discount Rates Table 7 Avoided Cost Assumptions Electric Utility Discount Rate (%) 6.% Gas Utility Discount Rate (%) 6.0% Real Discount Rate (%).7% Participant Discount Rate (%).00% Participant Income/Sales Tax Rate (%) 7.00% System Losses Residential Electric Losses (%).97% Residential Peak Electric Losses (%).% Commercial Average (Primary & Secondary) Electric Losses (%).6% Industrial Electric Losses (%).6% Industrial Peak Electric Losses (%).% Gas Losses (%) 0.08% Electric Generation Capacity Cost (Summer) CostBased Proxy for Electric Generation Capacity (Annualized $/kw) $8.8 Coincident Month () 7 Coincident Hour () Supplemental Reserve Margin (%) / MISO Planning Reserve Margin before EFOR 6.0% Transmission & Distribution Capacity Cost Distribution ($/kw) $0.8 Transmission ($/kw) $.0 Energy Cost Annual Average ($/kwh) $0.06 Annual MISO Peak Hours (%) 7.6% Annual MISO OffPeak Hours (%).% Annual Average Gas ($/Therm) $0.6 Table 8 MISO Ancillary Charges for Avoided Cost Calculations Month Avoided MISO Ancillary Charges ($/kwh) Jan $0.000 Feb $0.00 Mar $0.00 Apr $0.00 May $0.006 Jun $0.009 Jul $0.00 Aug $0.00 Sep $0.008 Oct $0.008 Nov $0.006 Dec $0.00

104 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Year Table 9 Applicable Future Year Escalation Factor Adjustment for Avoided Cost Calculations Electric Base Rates Electric Fuel Cost Factor Electric Avoided Capacity Cost Electric Avoided T&D Cost Electric Avoided Energy Cost Electric MISO Ancillary Market Gas Rates Gas Capacity Cost Gas Fuel and Supply Cost (EIA )

105 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources End Use Sector C&I HVAC Table 0 Projected Avoided Costs for DSM 060 (0$) C&I Lighting C&I Other C&I Process Residential HVAC Residential Lighting Residential Other 06,88,60,789,89,09,9,769,80,098,78,9,689,97 07,,06,088,70,8,9,,9 76,6,69,0,, 08,68,0,8,09,86,6,86,06,7,07,0,87,88,96 09,7,6,8,7,6,0 7,6,69,67,99,8,7,67,7 00,979, 7,89,9,80,698 9,,0,7,7,0,6,6,9 0 7,06,67,,6,,6,9,0,67,878,,006,07,96 0 8,7,80,90,9,98,8,97,,6,6,90,8,,9 0 0,67,77 0,0,0 6,06,60 6,77,608,98,99,8,06,80,07 0,7,,86,7 6,88,9 9,,60,70,6 6,,9 6,79,9 0,00,06,88,76 8,,,8,096,6,89 7,96,076 8,6, ,7, 7,69, 9,009,98 6,68,69 6,678,808 8,90,9 9,,6 07 9,608,00,788,7 9,98,9 0,0,706 7,6,6 9,807,096 0,,6 08,09, 0,9,8 0,9,99,60,8 8,6,689,,,808,8 09,668,7 6,80,9,79,8 7,,7 9,79,89,6,99,6,7 00 7,,0 6,,89,0,9,09,99 0,96,87,9,0,80,0 0 9,69,066 69,7,0,6,76,7,7,00,,69,879 6,99,90 0,9,9 7,7,08,70, 8,66,7,7,,66,78 8,7,68 0,89,7 8,8,8,69,79,,66,9,6,00,8 0,8,96 0 7,7,89 90,6,60,7,0 6,68,07 6,69,6,9,90,887,90 0 0,6, 9,999,6,69,68 6,000,0 7,7,6,9,7,6,88 7

106 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources See Table for 060 projected number of participants. These participation numbers represent customer adoption of economic DSM measures. End Use Sector C&I HVAC Table Cumulative Participants for 060 (Net) C&I Lighting C&I Other C&I Process Residential HVAC Residential Lighting Residential Other 06, 86,9,,8 8,68,07,,8 07,96 8,8 9,9,6,90,,76 6,7 08,6 78,907 6,70 7,9,9,780, 8,77 09,8 76,9 76,9 9,8 9,07,08,78 0,78 00,7,60,8 79,6 0,970 7,0,87,9 7,89 0,,66,69 80,66,69 7,809,80,8 60, 0 6,,60,090 8,08,8 7,08,, 8,77 0 7,99,,99 8,8 7,687 66,76,80,88 8,68 0 8,09,6,68 8,986 9,878 76,76,79,9 78, , 6,,09 86,660,0 86,976,8,60 0, ,86 7,9,68 88,9,09 97,8,068,8, 07, 8,8,66 90,0 6,66 08,70,,0 8,6 08,60 9,,99 9,6 8, 9,70,9,7 8, 09,87 0,0,70 9,0 0,66,9,9,8 6,000 00,98 0,7,0 8,68,7,97,8, 69, ,0,8,0 68,6,87 9,98 6,90,6 67, 0 7,90,0,6,687 6,978 76,0,97,69 70, ,6,9,89, 9,07 90,,877,7 7,0 0 9,60,98,0,,6 0,69,66,00 76,6 0 0,768,77,9 6,98, 8,6,9,0 79,8 Strategies to Capture Lost Opportunities In the Order for IURC Cause No. 9, the Commission authorized NIPSCO to recover the costs associated with its approved Core and Core Plus programs through the DemandSide Management Adjustment ( DSMA ) Rider. NIPSCO makes semiannual filings for factors to be effective January through June and July through December of each year. These filings will reflect estimated costs and DSMA Factors and recovery occurs over a sixmonth period which coincides with the estimation period. Reconciliation to actual expenditures is made in a subsequent semiannual filing. In August 0, the Commission issued an Order in IURC Cause No. approving NIPSCO s request for approval for the recovery of lost margins through its DSMA filings. Calculation of Lost Margins In determining the forecasted measures that are to be installed in a given time period on a goforward basis, NIPSCO assumes that the measures will be installed, and therefore the associated energy and demand savings achieved evenly over the months of each calendar year. A reduction of any savings from measures that were installed longer than their identified measure life will be removed from the cumulative savings as well. Cumulative measure savings will be reset to zero as of the test year in NIPSCO s next electric rate case. For deemed savings, NIPSCO uses the actual (evaluated and unevaluated) installed measures to determine the deemed net energy and net demand savings and then 8

107 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources utilizes the forecasted deemed net energy and demand savings as approved by its Oversight Board. NIPSCO ultimately reconciles the projected net energy and net demand savings with the actual deemed savings from actual installed measures. The projected net energy and net demand savings are also reconciled again once the EM&V results are received for the Program Year in question. The evaluated deemed savings, verified measure installations and evaluated net to gross ratios will be applied retroactively to the original projected savings figures for the purposes of reconciling lost margins. NIPSCO s current electric rates are used to calculate the projected lost margins. With the exception of Rate 6, the tail block (lowest energy rate) is used to calculate the lost margins for reduced energy. The middle block rate was used for Rate 6 since this rate uses an inverted energy rate block structure. Lost margins for net demand reduction assume each customer is on the transmission (or lowest) demand charge for each rate. Lost margins associated with reduced net energy also reflect the reduction of the energy rate by the variable operations and maintenance ( O&M ) expense for generation expenses that was used to compute NIPSCO s current rates. CostBenefit Components All DSM Core Plus programs are evaluated for consideration of inclusion in the IRP using the DSMore software and must be costeffective based on the TRC test. DSMore, developed by Integral Analytics, is a modeling tool for EE and DSM that correlates weather, loads and prices on an hourly level. The DSMore application is unique in that it values DSM/ EE using a riskbased approach. The relationship between prices and loads is captured at the hourly level (8760) to accurately measure the riskbased DSM value. Some of the advantages of DSMore include: Provides all standard costeffectiveness tests, plus longrun option value test. Aligns prices and loads at hourly level, by daytype, month, leap years, holidays, etc., and by region. Customizes avoided costs to specific customer load shapes and unique weather sensitivities. Supports gas and electric programs, numerous rates and program types including conservation, demand response, customer sited renewables and electric vehicles. Provides summary financial reports, and aggregations, including accurate weather normal lost revenues and shared savings. NIPSCO focused on the following five common costeffectiveness tests to examine the measure from different perspectives: Utility Cost Test ( UCT ) or Program Administrator Cost ( PAC ) Test This test includes the energy costs and benefits that are experienced by the energy efficiency program administrator. This test is most consistent with the way that supplyside resources are evaluated by vertically integrated utilities. The costs include all expenditures by the program administrator to design, The NIPSCO Oversight Board is comprised of NIPSCO, the Office of Utility Consumer Counselor, the Citizens Action Coalition, Inc. and the NIPSCO Industrial Group. 9

108 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources plan, administer, deliver, monitor and evaluate efficiency programs offset by any revenue from the sale of freed up energy supply. The benefits include all the avoided utility costs, including avoided energy costs, avoided capacity costs, avoided transmission and distribution costs, and any other costs incurred by the utility to provide electric. Utility Test = Avoided Costs Utility Costs TRC Test This test includes the costs and benefits experienced by all utility customers, including both program participants and nonparticipants. The costs include all the costs incurred by the program administrator and participating customer, including the full incremental cost of the efficiency measure, regardless of whether it was incurred by the program administrator or the participating customers. The benefits include all the avoided utility costs, plus any other program benefits experienced by the customers, such as avoided water costs, reduced operations and maintenance costs, improved comfort levels, health and safety benefits, and more. TRC Test = Avoided Costs+Tax Saved Utility Costs+Participant Costs Net of Incentives Ratepayer Impact Measure ( RIM ) Test This test provides an indication of the impact of energy efficiency programs on utility rates. The results of this test provide an indication of the impact of energy efficiency on those customers that do not participate in the energy efficiency programs. The costs include all the expenditures by the program administrator, plus the lost revenues to the utility as a result of the inability to recover fixed costs over fewer sales. The benefits include the avoided utility costs. RIM Test = Avoided Costs Utility Costs+Lost Revenue Societal Cost Test This test includes the costs and benefits experienced by all members of society. The costs include all of the costs incurred by any member of society: the program administrator, the customer, and anyone else. Similarly, the benefits include all of the benefits experienced by any member of society. The costs and benefits are the same as for the TRC Test, except that they also include externalities, such as environmental costs and reduced costs for government services. Societal Test = Avoided Costs+Tax Saved+Environmental+Other Utility Costs+Participant Costs Net of Incentives 60

109 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Participant Test This test includes the costs and benefits experienced by the customer who participates in the efficiency program. The costs include all the direct expenses incurred by the customer to purchase, install, and operate an efficiency measure. The benefits include the reduction in the customer s electricity bills, as well as any financial incentive paid by the program administrator. Participant Test = Lost Revenue+Incentives+Tax Savings Participant Costs CostBenefit Analysis Table summarizes the portfolio results for the total portfolio, Residential and C&I programs. Table Benefit Cost Analysis NIPSCO 0 Proposed DSM Electric Programs Utility Test TRC Test RIM Test Societal Test Participant Test Benefit Cost Analysis NIPSCO DSM Electric C&I Portfolio NIPSCO DSM Electric Residential Portfolio NIPSCO DSM Electric Portfolio Demand Response Interruptible Service On December, 0, the IURC issued an Order Cause No. 969 approving Electric Service Tariffs which included Interruptible Industrial Service Rider 67. Rider 67 is available to customers taking service under Rate 6, Rate 6 or Rate 6. NIPSCO held an open enrollment for available capacity under Rider 67 with eligible customers while affording the first offering of interruptible capacity to customers whom were already contracted for interruptible capacity under previous contracts. The total capacity made available under this Rider was limited to 00 MW and the total sum of credits could not exceed $8,000,000 in any calendar year. All requests for capacity had to be,000 kw or greater. Eligible customers were contacted and asked for the amount of interruptible capacity and options for which they were willing to contract. All requests were considered according to length of notice to interrupt or curtail (option) with the first allocation going to the shortest notification time and then to the next shortest notification time (Option D, C, B, A). Allocations were finished when the $8,000,000 annual credit was reached. At that time NIPSCO had contracted with eligible customers for a total of 77,08 kw of Rider 67 capacity. 6

110 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources The Interruptible Contract Demand is the demand (kw) that the customer makes available for Interruptions and/or Curtailments from one or more of the customers premises taking service under Rate 6, Rate 6 or Rate 6. Customers taking service under this Rider specify a Firm Contract Demand that they intend to exclude from interruptions or curtailments. Customers who contracted for this service are required to interrupt or curtail at the stated notice by NIPSCO and the provisions of service under this Rider to Customers require they meet the applicable Load Modifying Resource requirements pursuant to MISO Tariff Module E or its successor. NIPSCO registered all 77,08 kw Rider 67 capacity with MISO. NIPSCO also has an interruptible service for residential, commercial and industrial customers through the A/C Cycling program. NIPSCO started marketing this program in November of 0. Actual cycling began in the summer of 0. This program has the ability to reduce peak load by cycling residential, commercial and industrial air conditioning units during times of peak demand. Customer Distributed Generation Introduction NIPSCO s FIT pilot was approved on July, 0, and implementation began immediately as a threeyear pilot program with a 0 MW capacity cap. The FIT offers a pilot rate greater than the retail electric rate in the current approved sales tariffs that provides an incentive to encourage development of renewable generating resources. The pilot program is designed to help maximize the development of renewable energy in Indiana, and includes biomass, wind and solar resources. The FIT tariff pilot program provides the customer a sellback opportunity to NIPSCO at a predetermined price for up to years through a Renewable Purchase Power Agreement ( RPPA ). Participating customers receive a cash payment from NIPSCO for the amount of electricity generated and delivered to NIPSCO through an approved interconnection and metering point. Additional program details: The participating generator must be an existing NIPSCO electric customer. Installation must be wind, solar, and new hydroelectric or sustainable biomass projects. FIT is available to all NIPSCO electric customers. Supports generation projects with a generating nameplate capability from kwmw. A Interconnection Agreement (IA) and RPPA is required to reserve capacity or enter the Queue under the FIT, Rate 66 structure. On March, 0, FERC conditionally approved MISO Docket ER with an Order which provides that Load Modifying Resources, such as Interruptible Demand, will be treated as Capacity Resources, effective March, 0. Further, in converting the Load Modifying Resource to a Capacity Resource, it is to retain its current value in satisfying resource adequacy requirements. Therefore, the Load Modifying Resource value is grossedup by Planning Reserve Margin and the Transmission Losses, since such resources have neither transmission losses, nor forced outages. As such, the 77 MW of Load Modifying Resources that NIPSCO had in the summer of 0, becomes MW of Capacity Resources in the summer of 0, without any change in the actual resources. 6

111 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources The customer is responsible for interconnection fees and installation costs per the Indiana Administrative Code. The customer is responsible for maintenance and proper operation of the generating device in a safe manner consistent with interconnection agreement. Customer projects are classified into small solar and wind, and large wind, solar, biomass and new hydro. Each classification receives payment for the amount of energy generated per approved Rate 66: Wind 00kW: $0.7/kWh Wind 0kWMW: $0.0/kWh Solar kw 0kW: $0.0/kWh Solar kwmw: $0.6/kWh Biomass MW: $0.06/kWh New hydro MW: $0./kWh Participation The following tables summarize the customer participation in the FIT as of July, 0. Table lists, by technology and size segment, the generation approved, connected and operating. Technology Table FIT Project Status InService Projects (kw) In Construction (kw) Total FIT (kw) Biomass 9,0,00,0 Solar (large),00 0,00 Solar (small) Wind (large) Wind (small) New Hydro Total,670,00 9,70 Table lists all applications that did not get approved for participation in the FIT as of July, 0. These projects can move forward if they were to elect to utilize the small power producer cogeneration tariff that is currently approved and available to these proposed generating projects. 6

112 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Table Pending FIT Application (not approved) Pending Applications not in service/ queue Technology (kw) Biomass (large) 7,90 Solar (large),986 Solar (small) 60 Wind (large),00 Wind (small) 0 New Hydro 0 Total,6 Total metered generation for projects that have interconnected and have begun selling energy to NIPSCO is 7,898,89 kwh through December, 0. Table below shows the annual production and growth by technology segment. Table Annual Production by Technology Generation (kwh) Technology Total % Total Small Solar 8,89 7,806 90,70 0.8% Large Solar,78,789,7 6,,.0% Small Wind,88,7 9,0 0.0% Large Wind 90, 90, 0.% Biomass 6,9,79 9,,,60,78 6,97,9 77.% Total 6,9,79 9,708,67 7,969,8 7,898, % Table 6 has the projected annual output for FIT renewable energy generation when all customers either inservice or under construction are connected and selling energy to NIPSCO. Energy generated from biomass resources makes up approximately 79 percent of the projected renewable generation from FIT generators, while 9.8 percent of total FIT generation is projected to be generated from large solar generators. 6

113 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Technology Type Table 6 Forecasted FIT Generation by Technology Capacity Final (kw) Annual Production (kwh) Technology Capacity Factor Renewable Generation (%) Solar Small 700 8,68.% 0.7% Wind Small 0 8, % 0.0% Wind Large 0 70,9 0.6% 0.% Solar Large,00,09,9 7.6% 9.8% Biomass,0 89,706,0 7.% 79.% Total 9,70,6, % Unsubscribed 90 Total Capacity 0,000 FIT Phase II NIPSCO s current electric Rate 66 Renewable FeedIn Tariff offers an option, on a pilot basis, aimed at promoting further renewable generation opportunities in Northern Indiana and responding to customers interest in powering their homes and businesses with renewable energy projects. The pilot program has a total nondispatchable capacity available of 0 MW. As of October, 0,.67 MW of generation is in service. The generation in service is listed in Table 7. Table 7 FIT Phase II Generation in Service Technology MW Biomass (large)* 9. Solar (large)*.0 Solar (small)* 0.69 Wind (large)* 0. Wind (small)* 0.00 New Hydro 0.00 Total.670 *large represents project size of kw 000 kw *small represents project size of kw 0 kw *.00 MW Biomass (large) is currently in queue On October 9, 0, the Stipulation and Settlement Agreement between NIPSCO, the Indiana Office of Utility Consumer Counselor, Citizens Action Coalition of Indiana, Inc., the Hoosier Chapter of the Sierra Club, Indiana Distributed Energy Alliance, Inc., and Bio Town Ag, Inc. in IURC Cause No. 9 was filed. The settlement proposes to provide an additional 6 MW of capacity available for smaller renewable projects. 6

114 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Electric Vehicle Programs (Phase I and Phase II): NIPSCO INCharge Electric Vehicle Program At Home (Phase I) On February, 0, the Commission issued an Order in Cause No. 06 approving NIPSCO s INCharge Electric Vehicle ( EV ) Pilot Program. Approximately two months after Commission approval, on April, 0, NIPSCO launched its INCharge Electric Vehicle Program At Home. As of July, 0, NIPSCO had received customer enrollment requests. Of these requests, 8 have gone well beyond the initial inquiry. Of these 8, home charger and second meter installations have been completed for 7 customers and an additional customers are moving forward with scheduling installations. Estimates for installation costs, including the cost of a home EV charger, ranged from $667 to $, with an average of $,99. The average incentive amount used by customers with completed installations was $,6. A detailed customer request status breakdown as of July, 0 is provided in Table 8. Meter Installation Process Home Charger Installation Process Site Survey Process Enrollment Process Table 8 NIPSCO's INCharge Electric Vehicle Program At Home (Status Summary as of July, 0) Completed 7 In Scheduling Process Completed & Waiting on Customer to Proceed In Scheduling Process 6 Survey Completed Waiting on More Information from Customer In Scheduling Process 7 Waiting for Customer Response to Complete Online Survey Requested to be Recontacted at Later Date General Inquiry 9 Decided Not to Proceed 0 Customer Not Qualified 0 Waiting on NIPSCO 0 Total Requests to Enroll 66

115 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources A breakdown of the type of electric vehicles purchased by the,70 customers who have completed the entire process is provided below in Figure. Figure Type of Vehicle Purchassed Ford Fusion Energi % Ford CMax Energi % Mitsibushi Imev % Tesla Roadster % Tesla Model S 0% Smart % Chevy Volt 9% Toyota Prius Plug In % Think City % Nissan Leaf 7% The average cost to install a Level II home charging station during the pilot was just over $,90. A cost breakdown for the home charging station from the pilot is provided in Figure. Figure Average Home Charging Installation $,99 $,6 $,6 $7 $7 Total Cost Installation Charger Incentive Customer Portion On average, EV customers use approximately 06 kwh per month charging their electric vehicle. The actual amount of consumption, however, will vary by individual customer. Customer vehicle type will impact the consumption significantly as well as impact the demand on the grid. A Tesla Model S charging rate is 0 kw, while a Chevy Volt charging demand is only. kw. The Nissan Leaf charging demand ranges from. kw to 6.6 kw depending on the options installed in the car. To put demand in 67

116 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources perspective an average size residential home has approximately kw in connected load of which, on average, 8 kw might be on during coincidental peak time. Typical residential demand breakdown by appliance is: Water Heater. kw Range / Oven 8.0 kw Central Air Conditioner 6.0 kw Clothes Dryer.0 kw Dishwasher.0 kw Lighting, Fans, Appliances, Other 7. kw The most recent NIPSCO electric rate case indicated that the typical NIPSCO residential electric customer used 688 kwh per month on average during the weather normalized test year. The average EV consumption during the pilot is approximately 06 kwh; approximately 0 percent of the average home consumption. The type of vehicle purchased and the number of miles driven by the customer will directly impact the average consumption of the vehicle for each individual customer. NIPSCO found that the free energy during the offpeak times of 0 p.m. to 6 a.m. had a significant impact on charging behavior during the pilot. Figure below is an hourly chart showing the typical usage by hour over the most recent three month period (October 0 through January 0). The vast majority of the time, EV residential customers begin their charging session at 0 p.m. when the energy discounted period begins and the vehicles will be fully charged by 6 a.m. when the energy discounted period ends. As predicted, the total energy consumption is higher during the work week, when owners typically drive their vehicles more than they do on weekends. The analysis provides indication that Time of Use ( TOU ) rates do have an impact on pushing EV loads to more preferred off peak times for utilities. 68

117 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Figure Response to Time of Use Pricing Residential Home Charging PY Q (Hour Ending Local Time) Energy (KW) Weekday Weekend NIPSCO INCharge Electric Vehicle Program Around Town (Phase II) NIPSCO, in partnership with South Shore Clean Cities, has expanded opportunities for alternative fuel, through the launch of a public charging station incentive program in February 0. The NIPSCO IN Charge Around Town Electric Vehicle Program aims to make it easier and more affordable for businesses and organizations to install public charging infrastructure. INCharge Around Town incentive is to help with the upfront costs of public charging stations, in addition to installation costs and software subscriptions. The NIPSCO pilot program, available to commercial/industrial electric customers across northern Indiana, will continue through January, 0, or until incentive funding subscription is full. For every unit of electricity used by INCharge Around Town charging stations during the program, NIPSCO will buy an equivalent amount of renewable energy certificates ( RECs ). RECs are the environmental attributes associated with electricity that is generated from renewable sources, such as wind power. As of July, 0, NIPSCO has received separate customer applications for public charging stations. Of the customer applications, eight stations have been installed and another eight stations have been ordered, additional quotes have been provided to customers for installation and are waiting on customer signed contract to proceed. 69

118 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Green Power On December 9, 0, the Commission issued an Order in Cause No. 98 approving NIPSCO s Green Power Rate ( GPR ) Pilot Program. NIPSCO s GPR Program is a voluntary program that allows customers to designate a portion or all of their monthly electric usage to be attributable to power generated by renewable energy sources, such as wind power. Customers can enroll online, through the IVR or through a CSR. See Figure 6. Figure 6 Cumulative Enrollment Type by Month 700 IVR Call Center Web The GPR Pilot Program allows NIPSCO s electric customers to designate all or portions of their total electricity usage to be attributable to green power. Green power is energy generated from renewable and/or environmentallyfriendly sources or a combination of both which meets the Greene Energy National Standard for Renewable Electricity Products in all regions of the United States. Eligible sources of Green Power include: solar; wind; geothermal; hydropower that is certified by the Low Impact Hydropower Institute; solid, liquid, and gaseous forms of biomass; and cofiring of biomass with nonrenewables. Green Power includes the purchase of RECs from the sources described above. For the GPR Pilot Program, NIPSCO s residential electric customers can designate, 0 or 00 percent of their total electricity usage to be attributable to Green Power. In addition to those options, NIPSCO s commercial and industrial customers also have the option to designate five or ten percent of their total electricity usage to be attributable to Green Power. As of December, 0, 606 customers were participating in the GPR Pilot Program. 70

119 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Figure 7 below shows the breakdown among residential customers as of December, percent of residential customers participating in the program designated 00 percent of their total electricity usage to be attributable to Green Power. Figure 7 Residential Customer Count by Dedicated Green Power Allocation as of // 0% % % Green Power 0% Green Power 78% 00% Green Power Figure 8 shows the breakdown of commercial and industrial customers as of December, 0. There are 88 percent of commercial and industrial customers participating in the program that designate 00 percent of their total electricity usage to be attributable to Green Power. Figure 8 Commercial Customer Count by Dedicated Green Power Allocation as of // % % 6% % Green Power % Green Power 0% Green Power 88% 00% Green Power 7

120 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources NIPSCO s GPR Pilot Program for the period January through December 0 accounted for,,678 kwh energy consumption of designated Green Power. Residential customers accounted for,88,7 kwh energy consumption of designated Green Power. Commercial and industrial customers accounted for,,606 kwh energy consumption of designated Green Power. Although the majority of NIPSCO s customers enrolled in the GPR Pilot Program are residential customers, the bulk of the designated customer usage under the program is attributable to the small number of enrolled commercial and industrial customers. In addition, for both the residential and commercial customers, the majority of the enrollments and designated Green Power are those that designate 00 percent of their energy as Green Power. Table 9 below shows the energy consumption of designated Green Power for all participants for the period January through December 0. Table 9 0 All Customers (KWh) All Rates % % 0% 00% Total Jan ,8 8,76 Feb 8 78,6, 7,096 Mar 7,7,80,0 60,96 Apr 06,890,67 60,9 66, May 6,,,8 9,0 Jun 9,8 7,088 86, 96,07 Jul 70, 9,8 0,7,798 Aug 6,6 0,6,78,986 Sep 8,96 0,0 790,9 8,9 Oct 0,776 8,7 6,808 66, Nov 67,0 9, 60,876 67,0 Dec,,69 807,6 87,9 Total, 6,7,77,09,70,,679 Total % 0.0%.0%.0% 96.0% 00.00% 7

121 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Table 0 shows the energy consumption of designated Green Power for participating residential customer by rate for the period January through December 0. Table 0 0 Residential Customers (KWh) All Res Rates Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Total % % 69 78,7,890,,8,,6,96 0,776,0,7 6,.% 0% 77,6,80,67, 7,088 9, 0,86 0,6 8,66 9,7,609, % 00% 7,8 8,06 8,6,8 69,060 9,787, 8,99 8,76,67 9, 60,008,69, % Total 8,,,699 9,8 7,9 0,0,97 7,700,,7 69,867 97,890,88, % 6 % 69 78,7,890,,8,,6,96 0,776,8,07 6,.% 0% 77,6,80,67, 7,088 9, 9,66 8,79 6,66 7,06 0,67,9 6.% 00% 7,8 7,900 6,76,900 66,6 9, 7,07,77 70,,997 8,69,88,69, % Total 8,,6,89 8,6 7,9 00,0 9,87 67,79 0,9 0, 6,9 77,,807, % 6 % % 0% 7,67,60,69,0 0,07 % 00%,8 99,,6,90,90 9,8 9,67 0,09,96 6,800 8% Total,8 99,,6,90,9,9,6,9 9,7 67,0 00% 6 % 0 0.0% 0% 0.0% 00% ,90 996,09,07 9,87 9, % Total ,90 996,09,07 9,87 9, % 7

122 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Table below shows the energy consumption of designated Green Power for participating commercial and industrial customers by rate for the period January through December 0. Table 0 Commercial Customers (KWh) All Com Rates Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTAL Total % % , 0.% %,06,06 0.0% 0% % 00%,7 7,,8 8, 9,766 08,98,789 08,67 0,7 0,7 7,7,,9 6.7% Total 0, 7,797 6,9 8,8 9,8 09,60,86 09,7 0, 0,68 0,0,, % 60 % 0 0.0% % 0 0.0% 0% 0.0% 00%,99, 7,088,0 0.8% Total,99, 7,088,06 0.8% 6 % , 0.% % 0 0.0% 0% % 00%,7 7,,8 7,06 0,86,66,97 9,8 7,9 6,,80 7,79.% Total 0, 7,797 6,9 7,07 0,70,0,70 9,99 7,70 6,7,76,67.% 6 % 0 0.0% % 0 0.0% 0% 0.0% 00% 66,078 7,80 8,8 9, 78,986 68,80 6,77 7,77,0,7 7.8% Total 66,078 7,80 8,8 9, 78,986 68,80 6,77 7,77,0,8 7.8% 660 % 0 0.0% % 0 0.0% 0% % 00% ,07 0.0% Total ,8 0.0% 68 % 0 0.0% %,06,06 0.0% 0% 0.0% 00% 0,6 0,6.0% Total,,.0% Note (Tables, and ): The statistical information for January 0 through December 0 billing usage is derived from the number of customers and the Green Power energy billed each month during the period from NIPSCO s CIS billing system. 7

123 Petitioner's Exhibit No. C 0 Integrated Resource Plan Section Existing Resources Participating customers are billed under their current applicable rate, with a separate line item showing the premium to participate in the GPR Pilot Program. This premium is calculated by multiplying the GPR rate by the kwh the customer specifies to be subject to the GPR. Table shows the Green Power premiums applicable during the period January through July 0. Table Green Power Premiums January 0 through June 0 July 0 through December 0 January 0 through June 0 July 0 through December 0 Green Power Factor $ $ $ $ Percentage Change In Factor 7.0%.% 0.9% 7

124 Cumulative Net Incremental Gross Cumulative Net Incremental Gross Cumulative Net Incremental Gross Cumulative Net Incremental Gross Petitioner's Exhibit No. D Cumulative Net and Incremental Gross Savings (MWh)by Year for Programs Selected by the Integrated Resource Plan Residential Lighting C&I Lighting C&I Other C&I Process IRP Total Cumulative Net Incremental Gross 06 9,067,9 8,9,7 9,7 6,87 6,90,7,906 70,0 07 8,86,8 0,7,7 0,8 7,8,77,89 6,66 68,6 08 8,00 0,0,08,6 0,7 7,0 7,79 8,0,89 7,78 Total 6,0,877, 6,77 90,78, 6,7 78,68 9,89 0,9

125 Petitioner s Exhibit No. Page VERIFIED DIRECT TESTIMONY OF VICTORIA A. VRAB Q. Please state your name, business address and job title. A. My name is Victoria A. Vrab. My business address is 80 E. 86 th Avenue, Merrillville, Indiana 60. I am employed by Northern Indiana Public Service Company ( NIPSCO or the Company ) as Director of Demand Side Management Programs Q. Please summarize your educational and employment background. A. I have been employed in the regulated natural gas and electric industry for more than 6 years. I graduated from Purdue University in 989 with a Bachelor of Arts degree in Communications with a concentration in Advertising and Public Relations. Beginning in 998, I was employed by NESI Integrated Energy/EnergyUSA as a Senior Sales Coordinator. Two years later I accepted a position within NIPSCO's Major Accounts Department as a Major Accounts Representative which is where I remained until June 008. In June 008, I accepted the position of Manager, Major Accounts Transmission. In June 009, I accepted the position of Manager, Gas Transportation, Sales Support and Choice. In March 00, I accepted the

126 Petitioner s Exhibit No. Page position of Director, Major Accounts. On May, 0, I left Major Accounts and accepted a new position as Director of Demand Side Management Programs Q. What are your responsibilities as Director of Demand Side Management Programs? A. As Director of Demand Side Management Programs, I am responsible for the design, implementation and daytoday responsibilities of all demand side management ( DSM ) and energy efficiency ( EE ) programs. This includes leading the DSM team, supporting the integrated resource planning as it relates to energy efficiency, and collaboratively working with NIPSCO's vendors, customers, Customer Service, Communications, Rates and Regulatory departments to assure that all programs are run in an efficient and effective way Q. What is the purpose of your testimony? A. The purpose of my testimony is to describe () NIPSCO s current electric DSM programs, () NIPSCO s proposed electric energy efficiency program for the period 0608, () cost allocations, () program budgets and energy savings, () lost revenues projections and (6) performance incentives.

127 Petitioner s Exhibit No. Page Q. Are you sponsoring any exhibits in this Cause? A. Yes. I am sponsoring Petitioner s Exhibit No. A, which is Appendix G of NIPSCO s integrated resource plan ( IRP ) submitted to the Indiana Utility Regulatory Commission ( Commission ) on October, 0 (the 0 IRP ) showing the achievable savings forecast, Petitioner s Exhibit No. B, which is NIPSCO s Utility Input Information, and Petitioner s Exhibit No. C, showing the calculation of shared savings for the proposed energy efficiency programs NIPSCO s Current Electric DSM Program Q6. Please describe NIPSCO s current Electric DSM Program. A6. NIPSCO s current electric DSM and energy efficiency programs for its residential and commercial and industrial ( C&I ) customers for the period January, 0 through December, 0 was approved by the Indiana Utility Regulatory Commission (the Commission ) on November, 0 in Cause No. 96 ( 0 Electric DSM Program ). NIPSCO s residential programs consist of the following: 7 Residential Programs 8 Residential Lighting Program

128 Petitioner s Exhibit No. Page 6 7 Residential Elementary Education Program Residential Low Income Weatherization Program Residential Home Energy Audit and Weatherization Program Residential Energy Efficiency Rebates Program Residential New Construction Program Air Conditioning ( A/C ) Cycling Program Residential Home Energy Conservation Program 8 NIPSCO s C&I Programs consist of the following: 9 0 C&I Custom Program C&I Prescriptive Program C&I Small Business Direct Install Program School Audit Direct Install Program Air Conditioning ( A/C ) Cycling Program 6 7 Q7. How has NIPSCO s 0 Electric DSM Program performed thus far? A7. Through the first quarter of 0, NIPSCO s residential programs are forecasted to achieve 00% of the savings. Specifically: Residential Lighting has achieved.9% of the annual savings goal for 0. Even with the slow start to this program, increased awareness through instore demonstrations scheduled over the next several months will increase participation. NIPSCO expects to meet the

129 Petitioner s Exhibit No. Page savings goal by year end. Residential Home Energy Audit and Weatherization has achieved.8% of the annual savings goal for 0. However, people tend to look to do these projects during the warmer months, such as A/C tuneups. Therefore, NIPSCO expects to meet the savings goal by year end. Residential Low Income Weatherization has achieved 0% of the annual savings goal for 0. Due to contract revisions, activity in the field did not begin until late March. Since then, customer appointments and installs continue to stay steady. NIPSCO continues to work with CLEAResult to ensure savings goals are met by year end. Residential Energy Efficiency Rebates has achieved.8% of the annual savings goal for 0. A strong trade ally network and well received list of measures continues to allow this program to be successful. Residential Elementary Education has achieved 0% through the first quarter. Many teachers chose to do this program at the end of the current school year, meaning the bulk of the savings will be claimed within the second quarter of this year. This program is fully subscribed with 00% of the kits scheduled to be shipped this month. Residential New Construction has achieved.% of the annual savings goal for 0. This program is highly dependent upon the market for new home sales as well as the program design. HERs ratings are not obtained until the home s construction is complete and current shortages of skilled tradesman in the area are causing a delay in the completion of the homes. NIPSCO continues to closely monitor this situation and work with CLEAResult to ensure the savings goal will be met by year end. Residential Home Energy Conservation (Opower) has achieved.% of the annual savings goal for 0. Because summer provides an ideal time for behavior to be changed, particularly related to air

130 Petitioner s Exhibit No. Page 6 conditioner usage, the program is on track to achieve its annual goal. Although A/C Cycling is closed to new participants and does not save energy, it is expected to meet the established demand savings goals. Cycling takes place from June through September, so there are no results to report through the first quarter NIPSCO continues to work with Franklin Energy on pursuing projects that can be completed within the calendar year and to offer programs that appeal to smaller C&I customers. Specifically: C&I Prescriptive has achieved.0% of the annual savings goals through the first quarter. Despite the slow start, Franklin has assured NIPSCO that they have a plan to target specific customer segments (i.e. dry cleaners, hospitals, etc.) to help drive participation and achieve 00% of the savings goal by year end. C&I Custom has achieved 0% of savings for 0. These projects tend to have long lead times which means most of the program s performance will likely be toward the end of the year. Based on current applications received in 0, the program is on track to meet its savings goal by year end. C&I Small Business Direct Install has achieved.06% of savings thus far. Franklin Energy has been working with trade allies to strengthen the delivery of this program with installations ramping up. 6 School Audit Direct Install projects to serve approximately 0 schools this year. Many schools prefer to participate in this program in the summer between school years, meaning the majority of the savings will not be realized until potentially the third quarter of this year.

131 Petitioner s Exhibit No. Page NIPSCO s 0608 Electric EE Program Q8. Please describe the methodology NIPSCO followed in developing the proposed 0608 Electric EE Program. A8. In 0, NIPSCO contracted with Applied Energy Group ( AEG ) to perform a forecast of achievable savings that could then be utilized by NIPSCO s Strategic Planning Department in development of NIPSCO s 0 IRP. For its part, AEG identified DSM and energy efficiency measures that would be appropriate for the NIPSCO service territory based on Census information, population growth, age of the housing stock, and potential technology existing today and in the future, and the potential savings associated with these various measures. AEG also determined the likely level of participation. The achievable savings forecast is shown in Appendix G of the 0 IRP, a copy of which is attached hereto as Petitioner s Exhibit No. A. NIPSCO then provided a variety of utility inputs, as shown in Petitioner s Exhibit No. B for use with the modeling in DSMore by Morgan Marketing Partners to start the screening process by assessing the benefits (or avoided Petitioner s Exhibit No. B includes two sets of inputs. The first set was used in 0 for purposes of modeling DSM for the IRP. The second set was updated with 0 information for use in modeling the 0608 Electric EE Program.

132 Petitioner s Exhibit No. Page 8 costs) against the cost of the measure. NIPSCO witness Richard A. Morgan discusses DSMore and his modeling process more fully in his testimony NIPSCO s utility input information, from both internal and external sources, accounted for energy, capacity, transmission and distribution and ancillary costs. These sources included the NIPSCO Rates & Regulatory Department, NIPSCO Energy Supply and Trading Department, NIPSCO Generation and Dispatch Department, Energy Information Administration (EIA), NYMEX and PIRA Market Prices, among others. As measures passed the initial screening, they were aggregated by end use (heating, cooling, lighting) and then by sector (residential, commercial and industrial). Ultimately, there were seven measure groupings: Residential Heating, Ventilation and Air Conditioning ( HVAC ), Residential Lighting, Residential Other, C&I HVAC, C&I Lighting, C&I Other and C&I Process. Although not all of the measure groupings were selected by the model in the 0 IRP, NIPSCO elected to include the projected savings for each of the aggregated end use sectors in preparing its requests for proposals ( RFPs ) for its 0608 Electric EE Program.

133 Petitioner s Exhibit No. Page 9 Q9. Based on the foregoing, what savings goals were established for the Electric EE Program? A9. The following savings goals for each year of the 0608 Electric EE Program were established: Residential Electric Gross kwh Savings Residential HVAC,6,000,707,000,87,000 Residential Lighting,9,000,8,000 0,0,000 Residential Other 9,0,000 8,97,000 8,87,000 C&I Electric Gross kwh Savings C&I HVAC,0,000,09,000,77,000 C&I Lighting,7,000,7,000,6,000 C&I Other 6,87,000 7,8,000 7,0,000 C&I Process,7,000,89,000 8,0, Q0. Did NIPSCO adjust its planning assumptions for 06 to account for customers who have opted out or may opt out of participating in NIPSCO s energy efficiency program? A0. As part of its forecast of the available energy efficiency in NIPSCO s electric service territory, AEG assumed no customers would opt out of participation in NIPSCO s energy efficiency program. However, Lockheed Martin (the selected administrator of NIPSCO s proposed C&I programs) did adjust its

134 Petitioner s Exhibit No. Page 0 planning assumptions to take into account current and potential opt out customers Q. Will the opt out of customers have an impact on NIPSCO s ability to actually achieve the forecasted savings goals set out above? A. No. The C&I portfolio included in the 0608 Electric EE Program is expected to achieve savings of about 0 million kilowatt hours ( kwh ) over a three year period or 70 million kwh per year, which is roughly equivalent to the 68 million kwh that was forecasted for NIPSCO s current 0 Electric DSM Program. Although NIPSCO did consider whether any industrial customers would opt out for the year 0 when forecasting the savings goals for the 0 Electric DSM Program, the 70 million kwh of savings per year seems reasonable, even with fewer customers participating. In addition, the bidders were aware of the ability for customers to opt out when designing their proposals, which meant they developed their programs with the expectation of achieving savings from only those customers who would continue participating in NIPSCO s energy efficiency programs (i.e., small to mid C&I customers).

135 Petitioner s Exhibit No. Page Q. Which of the seven measure groupings were selected as resources in the 0 IRP? A. The Residential Lighting, C&I Lighting, C&I Other, and C&I Process measure groupings were selected by the model as resources in the 0 IRP Q. Did NIPSCO include all of the programs included in the measure groupings that were selected by the 0 IRP in its 0608 Electric EE Program? A. Yes. All of the measure groupings that were selected as least cost in NIPSCO s 0 IRP are included in NIPSCO s 0608 Electric EE Program. In addition, when determining the programs to include in the portfolio of DSM programs for the 0608 time period, NIPSCO elected to expand the variety of programs and the savings goals in order to offer a more robust program to its customers. NIPSCO s 0608 Electric EE Program goes beyond those programs selected by the IRP Strategist model to include all programs where AEG forecasted achievable savings, even if the programs were not selected resources within the 0 IRP. 7 8 Q. Why did NIPSCO include programs in its 0608 Electric EE Program that were not selected as part of the 0 IRP?

136 Petitioner s Exhibit No. Page A. There are three reasons. First, NIPSCO wants to offer a robust portfolio of energy efficiency programs for its customers. If NIPSCO had only selected the measure groupings that were accepted through the IRP model, there would have only been one program for its residential customers lighting. Second, because NIPSCO had AEG s forecast of achievable savings, it is appropriate to pursue those savings and the benefits they will provide its customers. Finally, based on the planning numbers, the program size would remain relatively constant with what NIPSCO is currently providing and NIPSCO did not want to reduce the size of its DSM program offering Q. How did NIPSCO determine the budgets for the proposed programs? A. Once NIPSCO had determined the level of savings it expected to achieve over the three year period, it worked with its Oversight Board ( OSB ) to develop two RFPs one for residential programs and one for C&I programs. NIPSCO indicated () it wanted one vendor to provide the complete portfolio of programs (even if that vendor elected to utilize subcontractors), () it wanted the same vendor to offer both electric and gas programs where appropriate, and () it was expecting a low income program as well as a behavioral program to be part of the residential portfolio. Using these

137 Petitioner s Exhibit No. Page parameters, the bidders submitted proposals and NIPSCO used the winning bids as the basis for the program budget, which then informed the remainder of the budget forecasting process Q6. How were the winning bidders selected? A6. NIPSCO worked with its OSB to review the bids and then selected bidders to present their bids to NIPSCO and its OSB. The group heard presentations from two residential bidders and four bidders interested in providing C&I programs, one of which was interested in providing both residential and C&I programs. The OSB discussed both the proposals and the presentations and then asked NIPSCO to recommend a winning bidder based on that discussion. NIPSCO recommended the selection of GoodCents to provide the residential programs and Lockheed Martin to provide the C&I programs. The OSB voted 0, with the Industrial Group abstaining, in favor of NIPSCO s recommendation Q7. Are there benefits in utilizing one vendor for the residential programs and one vendor for C&I programs? A7. Yes. Using one vendor for each portfolio allows the customers to have a single point of entry for NIPSCO s energy efficiency programs. In addition,

138 Petitioner s Exhibit No. Page it means NIPSCO has fewer vendors to work with on issues related to marketing, reporting, and evaluation efforts. It streamlines the provision of the programs, eliminates barriers to entry, and likely decreases administration expenses. As an example of why a single vendor is a benefit, prior to 0, the Home Energy Assessment ( HEA ) program was frequently utilized as a direct lead into the Home Weatherization program. Because the HEA program and the Home Weatherization program were previously administered by different vendors, according to the 0 EM&V of the program, communication gaps between the vendors resulted in lower participation rates for the Home Weatherization program. A combined HEA and Weatherization program has streamlined the provision of the measures previously provided under two programs and should increase the number of customers receiving weatherization benefits after having an energy audit. Another example of the benefits of utilizing one vendor will be the elimination of any customer confusion on who is actually implementing the program. Under the structure prior to 0, C&I customers did not have onestop shopping for the Prescriptive Rebates and Custom programs. NIPSCO Residential Core Plus EM&V Report 0 FINAL, (February 0), filed in Cause No. 9 on March 7, 0, p..

139 Petitioner s Exhibit No. Page Because Franklin Energy currently runs all facets of the C&I program and Lockheed Martin will do so beginning in 06, this barrier has been eliminated Q8. Will the programs described below change through the life of this proposed plan? A8. NIPSCO is committed to the program portfolio outlined below and has worked with its OSB to obtain feedback on the program offerings. However, considering the time constraints, NIPSCO is providing program descriptions that are based on the vendor proposals. NIPSCO will continue to work with its OSB to refine the program offerings so that they deliver the greatest value to its customers Q9. How does NIPSCO propose to offer programs in its combined gas and electric service territory? A9. Where savings accrue to both fuels, the programs will be offered as a portfolio of offerings to NIPSCO s combination customers to make sure they are aware of the several ways they can become more energy efficient. This results in a more cost effective delivery of programs because a single vendor can visit a home and install both gas and electric measures in homes with

140 Petitioner s Exhibit No. Page 6 6 both gas and electric service. Moreover, offering the same programs in both the gas and electric service territory promotes administrative efficiency for all customers. Because GoodCents will be the only vendor for the Residential programs and Lockheed Martin will be the only vendor for the C&I programs, their network of providers will be able to more effectively market both gas and electric programs to NIPSCO s combination customers Q0. Was this combined administration taken into account when designing programs and formulating budgets? A0. Yes. The bidders were aware that they could market both gas and electric programs to combination customers and took this under consideration when designing the programs and formulating the budgets. Q. Please list the proposed Residential programs included in NIPSCO s Electric EE Program. A. The proposed Residential programs include: Residential HVAC Program Residential Lighting Program Residential Appliance Recycling Program Income Qualified Appliance Replacement Program

141 Petitioner s Exhibit No. Page 7 Home Energy Assessments Program School Education Program Behavioral Program 6 7 Q. Please list the proposed C&I programs included in NIPSCO s 0608 Electric EE Program. A. The proposed C&I programs include: Prescriptive Program Custom Program New Construction Program RetroCommissioning ( RCx ) Program Small Business Direct Install ( SBDI ) Program Q. Please describe the Residential HVAC Program. A. The Residential HVAC Program will influence the purchase and installation of highefficiency heating and cooling technologies through a combination of market push and pull strategies that stimulate demand while simultaneously increasing market provider investment in stocking and promoting high efficiency products. The electric program will promote premium efficiency

142 Petitioner s Exhibit No. Page 8 air conditioners and heat pumps that have highefficiency, electronically commutated motors ( ECMs ), and programmable thermostats Q. Please describe the Residential Lighting Program. A. GoodCents plans to continue its successful partnership with Ecova to deliver the Residential Lighting Program. GoodCents will build on its existing infrastructure and knowledge of the Indiana market to deliver a costeffective program that promotes the use of energy efficient lighting technologies. The program design specifically includes strategies to educate customers about new technologies, including light emitting diodes ( LEDs ). Over the course of the program, GoodCents anticipates going from 0% of the programs sales through LEDs in 06 to % by Q. Please describe the Residential Appliance Recycling Program. A. GoodCents proposed reinstating the appliance recycling program, which NIPSCO had elected to discontinue in 0. This is another example of how a single vendor will likely be able to promote positive results because GoodCents will be able to leverage the contacts it has with customers through other programs (the HEA for example) to encourage those customers to consider recycling inefficient appliances. GoodCents plans to

143 Petitioner s Exhibit No. Page subcontract with ARCA, the vendor previously utilized by NIPSCO, to implement this program. GoodCents is planning to offer a $0 incentive for recycled refrigerators and freezers. They have also proposed the collection of window air conditioners and dehumidifiers in conjunction with a qualifying refrigerator or freezer, although those appliances will not be eligible for an incentive and will not count toward the energy savings goal. Once picked up from the customer, ARCA disables the unit to prevent resale and recycles it in an environmentallyfriendly manner Q6. Please explain the Income Qualified Appliance Replacement Program. A6. The Income Qualified Appliance Replacement Program will provide qualified residential customers who are currently using older inefficient refrigerators with a new ENERGY STAR qualified refrigerator at no cost to the customer. This program will target current customers who may have an inefficient appliance within the home, but do not have the means to replace it on their own. GoodCents will utilize the services of ARCA to provide support to this program.

144 Petitioner s Exhibit No. Page Q7. Why is NIPSCO only offering an appliance replacement program rather than the largerscale weatherization typically provided to income qualified customers? A7. GoodCents proposed this program after its experience in providing the Income Qualified Weatherization Core program. The thought is that a number of customers received weatherization services, but could still have an older refrigerator that is energy inefficient and the replacement of that appliance can have a tremendous impact on the customer s energy usage. The plan is to replace approximately 70 refrigerators each year, for a total of, over the three year life of the program Q8. Please explain the HEA Program. A8. The HEA Program will offer a combination of inhome services and analytic software, which provides the highest degree of assessment delivery, quality and uniformity across the program. Energy efficient measures will be installed in participating homes at no cost to the customer. Upon completion of the audit, the homeowner will receive a customized home assessment report identifying energy usage and suggestions to further decrease consumption.

145 Petitioner s Exhibit No. Page Q9. Why did NIPSCO elect to discontinue the weatherization component of this program? A9. The weatherization component has struggled in NIPSCO s service territory for the past few years. While NIPSCO is expecting the program to deliver solid results since it is being offered as part of the home energy assessment this year, GoodCents did not have any data to form a decision that this would be a successful program. This is an example of how NIPSCO and its OSB may elect to change the program design once more information is known about the success of combining the two programs. However, at this time, NIPSCO anticipates offering an assessment with the direct installation of certain measures Q0. Please describe the School Education Program. A0. The School Education Program provides inclassroom curriculum to fifth grade students as well as a takehome kit of measures. The kit will be installed in the student s home by the student under the guidance of his/her parent/guardian in accordance with the lesson plan that was taught in the classroom. GoodCents will partner with AM Conservation who will furnish the education kits and NEF who will develop the curriculum and lesson

146 Petitioner s Exhibit No. Page plans for fifth grade classrooms. The program, which is aligned with Indiana state educational standards, has two primary goals in mind: () raise awareness and shape the behavior of elementary students through powerful energy and water efficiency curriculum that targets the implementation of measures while encouraging the sharing of that knowledge with family members and practicing conservation in their own homes, and () deliver energy and water efficiency savings results by distributing the energy efficient kits directly to the students at school Q. Please describe the Residential Behavioral Program. A. As customers become more educated in regards to their energy usage and thus involved in the process to decrease consumption, tools are needed to effectively promote that education and track progress. GoodCents has teamed up with Accelerated Innovations to offer a new approach to behavioral programs, one which capitalizes on customers desire to be connected and have information available at their fingertips or smartphone application. The WeatherBug Home Insight ScoreCard, combined with the MyMeter portal, will provide a customer engagement platform that will enhance NIPSCO s portfolio of energy efficiency programs for residential

147 Petitioner s Exhibit No. Page customers and provide greater opportunities for targeted marketing of complementary program offerings. Nationwide, the MyMeter portal and WeatherBug Home Insight ScoreCard are being used and are accessible to hundreds of thousands of customers on an ondemand/optin basis through multiple channels. WeatherBug Home combines utility meter data and granular weather data from its proprietary network to develop thermodynamic models and algorithms for each individual home that yields valuable energy usage insight to consumers and utilities. WeatherBug weather sensors are typically located on schools and firehouses in population centers where consumers live and use energy. The geographic location, depth of data collected and update frequency of its sensors are key differentiators of its weather data Q. Is NIPSCO planning to maintain the A/C Cycling Program that was closed to new participants in 0? A. No. The A/C Cycling Program has not achieved its participation enrollment goals. Although NIPSCO does not see the benefit for its customers at this time, it will continue to reevaluate the program to be included in NIPSCO s portfolio of demand response options.

148 Petitioner s Exhibit No. Page Q. Please describe the C&I Prescriptive Program. A. The C&I Prescriptive Program will provide financial incentives to nonresidential customers and will encourage them to improve the energy efficiency of their buildings and facilities through a broad range of proven and costeffective electric and natural gas energy efficiency measures that address major end uses and processes. Eligible facilities must have a nonresidential service via qualifying rate classes and include a vast array of commercial and industrial entities as well as nonprofit organizations, government agencies, schools/universities and other types of businesses. The purpose of the Prescriptive Program is to increase awareness and lower energy usage in commercial, industrial and institutional buildings. The program looks to provide a quick and straightforward process for customers to participate. In addition, Lockheed Martin intends on assisting customers in meeting their savings goals and educating customers on the benefits of energy efficiency while positioning NIPSCO as their trusted energy advisor Q. Please describe the C&I Custom Program. A. The C&I Custom Program will be a flexible program that provides incentives for any costeffective energy efficiency measures not covered in other

149 Petitioner s Exhibit No. Page programs offered within the NIPSCO C&I portfolio. Custom projects often involve multiple electric energy conservation measures across various HVAC, Lighting, Process and Other technologies. For more complex industrial applications, custom incentives will be provided for process improvements that reduce energy use per unit of product output. By the very nature of custom incentives, all technologies that claim to save energy and their associated energy savings calculations will be reviewed by Lockheed Martin engineers prior to issuance of a custom incentive offer to the applicant. Project approval will depend on measures passing all utility and state of Indiana costeffectiveness tests. Unlike the Prescriptive Program which offers a fixed price incentive based on deemed savings, incentives for the Custom Program will be specific to the proposed measure(s) and based on a $/kwh saved annually rate. Pre and postinstallation reviews will be required for projects that meet specific incentive levels and selfinstallation thresholds as described in the introduction to this section. These inspections will ensure that NIPSCO gains measurable and verifiable energy savings from custom projects, which can be considerably more complicated than prescriptive incentive measures. The program looks to provide a means to implement creative, effective and complex energy efficiency efforts by

150 Petitioner s Exhibit No. Page 6 commercial & industrial customers and to identify and encourage use of new and emerging technologies throughout the NIPSCO service territory to the benefit of the utility and C&I customers. In addition, Lockheed Martin looks to accurately quantify, track and verify savings from custom measures and to help NIPSCO secure significant and longterm energy savings Q. Please provide an update on the C&I Custom pipeline. A. The C&I Custom pipeline is a budgeting methodology to address the time delay between when a project application is submitted and approved, and when the project is actually completed, the incentive check is provided to the customer, and the savings are counted by NIPSCO. In order to effectively budget for this time delay, NIPSCO originally assumed that for any project that was submitted, 0% would be completed the same year, 0% would be completed in the following year, and all projects would be complete two years following the initial application. The intent of this methodology is to model when actual expenditures will take place and savings will accrue. NIPSCO is reviewing the current projects to determine if they will be complete by the end of 0. If not, those projects will be canceled and the customer will be allowed to reapply when the new program begins in 06.

151 Petitioner s Exhibit No. Page 7 Going forward, NIPSCO is looking to balance knowing about and budgeting for projects in the pipeline with the need to ensure projects will ultimately be completed Q6. Please describe the C&I New Construction Program. A6. The C&I New Construction Program is designed to encourage energy efficient new construction of electric C&I facilities within the NIPSCO service territory. The program will offer services and incentives to encourage building owners, designers, and architects to exceed the standard building practices to achieve efficiency above and beyond the current energy code requirements. The program aims to greatly improve the energy efficiency of all newly constructed or expanded facilities in the NIPSCO service territory. An important aspect of this effort is the establishment of the appropriate baseline for measuring energy efficiency gains. By using the appropriate baseline, energy savings can be accurately evaluated. NIPSCO will work with its OSB and Lockheed Martin in establishing this baseline Q7. Please describe the C&I RCx Program. A7. The C&I RCx Program will deliver energy and demand savings by helping building owners benchmark existing building performance levels, identify

152 Petitioner s Exhibit No. Page building operating system performance optimization improvements, and where applicable, provide financial incentives to assist with the implementation of the recommended efficiency improvements. Following the prolonged economic recession, many building owners have failed to maintain equipment and control systems to optimize performance. The RCx Program will provide assistance to qualifying NIPSCO C&I customers to maximize the efficient operations of these systems. The RCx Program will seek to identify efficiency opportunities associated with existing mechanical, electrical and thermal systems in nonresidential buildings by providing options for modifying existing controls equipment. Equipment that is found to be inefficient and outdated under this program may qualify for incentives under the Prescriptive or Custom Program. This program also assists customers in improving their operation and maintenance practices via compressed air and process system upgrades Q8. Please describe the C&I SBDI Program. A8. The C&I SBDI Program will deliver nocost and lowcost energy efficiency measures to save energy and reduce peak demand for small and medium commercial customers throughout NIPSCO s service territory. Eligible

153 Petitioner s Exhibit No. Page participants have an average monthly peak demand of less than 00 kw. The SBDI Program installs selected measures at minimal cost to participating customers. Customers typically receive free installation of no cost/low cost measures up to a predetermined limit. In addition, the SBDI Program provides additional installation of energy efficiency measures by SBDI Trade Allies with incentives of roughly 70% of the installed cost. The program does not pay rebates or incentives to the participating customer. Payments are made to the preapproved SBDI Trade Ally who employs the incentives to reduce the cost of delivering the energy efficiency services. The products and installation of products are at reduced cost or no cost to the customer per the terms of the SBDI Program. In addition, information about the installed measures will be provided to customers that explain the energy efficiency benefits they received and proper operation and maintenance practices to ensure sustained performance Q9. Why is the 0608 Electric EE Program significantly different than its 0 Electric DSM Program? A9. NIPSCO made the deliberate decision to issue RFPs that allowed potential vendors to be creative in their program designs. At the end of 0, NIPSCO

154 Petitioner s Exhibit No. Page will have been offering programs for over four years and it was determined that NIPSCO should take that opportunity to see if there were other options for assisting customers in being more energy efficient. NIPSCO is pleased that the proposed portfolio contains some programs that are proven winners in NIPSCO s service territory as well as some new programs. In addition, bringing in two new vendors should provide a new perspective regarding NIPSCO s service territory and the energy efficiency programs it provides Q0. Has NIPSCO selected an EM&V vendor for its 0608 Electric EE Program? A0. No. In order to get the most accurate bids from potential EM&V vendors, it is important to know the programs that will be offered. Therefore, NIPSCO and its OSB elected to determine the programs and vendors for the 0608 Electric EE Program and then issue an RFP to select the vendor to evaluate these programs. The OSB has ultimate authority to select the EM&V vendor and NIPSCO plans to have one in place before the programs begin in Q. Ind. Code 88.0 ( Section 0 ) states that a plan may include a home energy efficiency assistance program for qualified customers of the

155 Petitioner s Exhibit No. Page electricity supplier whether or not the program is cost effective. Is NIPSCO proposing such a program? A. No. As the program is currently designed, NIPSCO s Income Qualified Appliance Replacement Program currently passes the benefit cost test Q. Section 0 states that in making a determination of the overall reasonableness of the 006 Electric EE Program, the Commission should consider the inclusion and reasonableness of procedures to evaluate, measure, and verify the results of the energy efficiency programs included in the plan, including the alignment of the procedures with applicable environmental regulations, including federal regulations concerning credits for emission reductions. Do NIPSCO s EM&V procedures align with applicable environmental regulations? A. The United States Environmental Protection Agency ( EPA ) has proposed greenhouse gas reduction standards applicable to existing power plants, under section (d) of the federal Clean Air Act. The EPA s Clean Power Plan ( CPP ) is currently a proposed rule that, among other things, would require states to be able to quantify and verify emissions reductions. Because energy efficiency is one means a state plan can employ to achieve the

156 Petitioner s Exhibit No. Page 6 proposed reductions, the EM&V of energy efficiency programs will be a critical component of such a plan. However, the CPP is not finalized and is not anticipated to be effective until 00. To the extent any modifications to its plan or its EM&V efforts are necessary, NIPSCO will address them either in its next request for approval a DSM / energy efficiency plan and/or with the EM&V contractor Energy Efficiency Program Costs Allocations Q. How does NIPSCO propose to allocate Program Costs for its proposed 0608 Electric EE Program? A. NIPSCO proposes to allocate its Program Costs for all programs on a per kwh basis based on the six month kwh sales forecast for each Rate Schedule. This is the same allocation methodology approved in the Commission s 96 Order approving the 0 Electric DSM Program Q. How does NIPSCO propose to allocate costs associated with lost revenues? A. NIPSCO currently forecasts lost revenues by forecasting net energy and net demand savings by allocating projected energy savings in its energy forecast for most rates. There are two programs where NIPSCO uses customer count as the means for allocation: the A/C Cycling and Residential Home Energy

157 Petitioner s Exhibit No. Page Conservation programs. These programs are forecasted based on customer count because this is the most accurate way to allocate savings across the applicable rates to minimize the reconciliation adjustment. This is the same mechanism of forecasting lost revenues approved in the Commission s 96 Order approving the 0 Electric DSM Program Q. How does NIPSCO propose to allocate its proposed performance incentives? A. NIPSCO proposes to allocate its performance incentives in the same manner as the allocation of Program Costs on a per kwh basis based on the six month kwh sales forecast for each Rate Schedule Q6. How does NIPSCO reconcile forecasted participation by rate to actual participation? A6. Where a customer is known for a given measure installation, the customer is linked to its applicable rate based on a linkage with NIPSCO s Customer Information System. Actual net energy and demand savings are then reconciled to projections for each rate and adjustments are made as necessary. Only the Residential Lighting and the Residential Elementary Education programs do not have identifiable customers. Therefore, the

158 Petitioner s Exhibit No. Page customer assumed allocations will not change. This is consistent with the approach approved by the Commission in its Order Program Budget and Energy Savings Q7. How did NIPSCO determine its proposed budget for its 0608 Electric EE Program? A7. First, NIPSCO took the proposed program budgets offered by the winning bidders and added projected NIPSCO administrative costs (approximately % of proposed program costs) and projected EM&V costs (approximately % of proposed program costs). NIPSCO then determined the amount of lost revenues anticipated to be collected over the three year period by determining the projected lost revenues for measures that will be installed by the end of 0 as well as the measures that are expected to be installed under the 0608 Electric EE Program. Finally, NIPSCO forecasted performance incentives with a % incentive cap based on program costs (excluding NIPSCO administrative and EM&V costs) for each of the three years in the plan based on the methodology discussed by NIPSCO witness Alison M. Becker. Based on the foregoing, the proposed budget for the Electric EE Program is as follows:

159 Petitioner s Exhibit No. Page Residential C&I Total Program Budget $9,6,6 $6,,07 $,88,0 Lost Revenues $9,8,6 $,7,7 $7,79,6 Performance Incentives $,69,07 $,77,0 $,68,7 Total Projected Expenditures $0,99,86 $7,86,06 $,886, Q8. What is NIPSCO s projected budget for the Residential programs included in its 0608 Electric EE Program? A8. NIPSCO proposes a total projected budget of $0,99,86 for its Residential programs included in its 0608 Electric EE Program, inclusive of Program Costs (startup, implementation and administrative costs along with costs associated with the EM&V of those programs), lost revenues and performance incentives ( Energy Efficiency Program Costs. The table below shows the projected budget for each individual Residential program. 0

160 Petitioner s Exhibit No. Page 6 Residential Programs Program Budget Lost Revenue Performance Incentives Projected Budget HVAC $,0,7 $,,998 $,8 $,670,6 Lighting $,0,8 $9,69,89 $,0 $,9,809 Home Energy Assessments $,960, $,90,7 $6,868 $9,7, Appliance Recycling $,9,67 $,9,700 $8,97 $,6,7 Low Income Appliance $,70,06 $,70,9 $,0,99 Replacement School Education $,0,66 $,,69 $6,999 $,700,8 Behavioral $,89,6 $,99,0 $8,8 $,,7 Prior Program Lost Margin Collection $,,69 $,,69 Total Residential Programs Projected Budget $9,6,6 $9,8,6 $,69,07 $0,99,86 Q9. What is NIPSCO s projected budget for its C&I programs included in its 0608 Electric EE Program? A9. NIPSCO proposes a total projected budget of $7,86,06 for its C&I 6 programs included in its 0608 Electric EE Program, inclusive of Energy 7 Efficiency Program Costs. The table below shows the projected budget for 8 each individual C&I program. 9

161 Petitioner s Exhibit No. Page 7 6 C&I Programs Program Budget Lost Revenue Performance Incentives Projected Budget Prescriptive $9,0,68 $,669,86 $,9,6 $,9,77 Custom $,0,6 $9,76,67 $709,86 $,669,8 New Construction $,9,78 $,,0 $6,698 $,60,09 Small Business Direct Install $6,9,08 $,6,87 $88,7 $0,7,8 Retro Commissioning $,89, $,86,60 $89, $,9,997 Prior Program Lost Margin $8,6 $8,6 Total C&I Programs Projected Budget $6,,07 $,7,7 $,77,0 $7,86,06 Q0. What gross energy savings does NIPSCO project to occur for the period of 0608? A0. Based on the winning bidders proposals, NIPSCO projects gross energy savings for each year of the 0608 Electric EE Program as follows: 7

162 Petitioner s Exhibit No. Page 8 Projected Energy Savings (MWh) Residential Programs Total HVAC,67,709,878, Lighting,7,0 0,6,079 Home Energy Analysis 6,08 6,08 6,08 8,7 Appliance Recycling,90,90,90,70 Low Income Appliance Replacement ,807 School Education,79,79,79 0,6 Behavioral,89,79,79,77 Total Residential Programs,70,67,0 8,9 C&I Programs Total Prescriptive,89,77 7,88 78,9 Custom,0,6 6, 7,7 New Construction 0,6 0,9 0,9,8 Small Business Direct Install 6,89 6,86 7,0,0 Retro Commissioning 0,6 0,9 0,9,8 Total C&I Programs 68,90 68,60 7,0 0, Total Electric EE Program,608,, 8,99 Q. Should the Commission consider the projected program budgets and energy savings to be final? A. No. The budgets are estimates provided by the vendors given the projected 6 energy savings goal that was provided by NIPSCO. Each vendor developed 7 an energy savings plan and budget based on meeting the goals provided by

163 Petitioner s Exhibit No. Page 9 NIPSCO. The projected budgets and associated energy savings are NIPSCO s best projections at this time. However, specific cost recovery will be addressed in NIPSCO s Demand Side Management Adjustment Mechanism ( DSMA ) tracker proceedings (Cause No. 68DSMX), which are filed semiannually Q. Does NIPSCO expect program designs and projected budgets to change drastically? A. No. However, the program designs and projected budgets are not final. NIPSCO will continue to work with its OSB on program and budget design and, if approvals outside of the authority of its OSB are necessary, NIPSCO will request approval of those changes in its semiannual DSMA tracker proceedings (Cause No. 68DSMX). 6 7 Lost Revenues Projections Q. Please describe NIPSCO s lost revenues projections included in the Electric EE Program? A. Assuming there is not a base rate case in the intervening time period, NIPSCO projects approximately $7.8 million of lost revenues associated

164 Petitioner s Exhibit No. Page 0 with the implementation of the 0608 Electric EE Program, $9. million for Residential customers and $. million for C&I customers Q. How did NIPSCO project lost revenues associated with its 0608 Electric EE Program? A. NIPSCO considered the lost revenues associated with the measures that have been installed or are projected to be installed by December, 0 and carried those lost revenues through the three year period of January, 06 through December, 08 using the same numbers utilized in its most recent semiannual DSMA tracker proceeding (Cause No. 68DSM8). NIPSCO then forecasted the costs of the lost revenues for the measures forecasted to be installed as part of the 0608 Electric EE Program. The sum is the best estimate NIPSCO has at this time of the collection of lost revenues during the period January, 06 through December, Q. How does NIPSCO calculate lost revenues? A. In accordance with the Order, NIPSCO is authorized to collect lost revenues on its net energy and demand reductions resulting from its energy efficiency programs. In accordance with the 6 Order, for Core programs the collection of lost revenues began February, 0; for Core Plus

165 Petitioner s Exhibit No. Page programs, the collection of lost revenues began August 8, 0. It is important to note that the Commission approved the collection of lost revenues after those dates for measures installed prior to those dates. For example, for a refrigerator recycled in May 0, NIPSCO is allowed to collect lost revenues associated with that refrigerator as of August 8, 0 and for the remainder of the measure s useful life or until lost revenues are reset as part of a rate case. In accordance with the Order, the reconciliation of lost revenues takes place once per year, with the variance spread over the succeeding month period Q6. Please explain how NIPSCO forecasts lost revenues. A6. NIPSCO first determines the expected savings for the period being included in the forecast. It then assumes those savings will occur evenly throughout the time period and, based on the monthly deemed savings (annualized deemed savings divided by ) for the measure, assumes that amount of lost revenue will be accumulated each month. For example, Measure A has a monthly deemed savings of 0 kwh and NIPSCO forecasts that six will be installed between January and June 0. NIPSCO forecasts 0 kwh in January, 0 kwh in February, 0 kwh in March, etc. This forecast is allocated

166 Petitioner s Exhibit No. Page to the rate classes that are eligible to participate in the program based on the kwh forecasted for that particular rate class. For the next forecasting period, and until a reconciliation is completed, NIPSCO moves the previous amount forward into the next period and continues to add to it. Carrying the same example forward, for July through December 0, NIPSCO assumes another six units of Measure A will be installed. The lost revenues forecasted for Measure A for July 0 are 70 kwh (60 kwh from the prior period plus the new 0 kwh for the measure installed). This continues for the remainder of the measure life (or until NIPSCO completes a rate case), but is reconciled by the Company to account for actuals Q7. Please explain how NIPSCO completes its reconciliation of lost revenues. A7. This takes place in several steps. First, NIPSCO determines the actual number of measures installed by the rate class, for all programs except School Education and Residential Lighting. For example, if a customer on Rate 6 participated in the C&I Prescriptive Rebate program, the lost revenues attributable to that participation would be allocated to customers in Rate 6. Because NIPSCO does not receive the actual participant details in the School Education and Residential Lighting programs, those measures

167 Petitioner s Exhibit No. Page continue to be allocated based on the kwh volumes by the eligible rate class. The next step is to adjust the deemed savings based on the ex post gross savings and the nettogross adjustment from the EM&V report. This provides the ex post net savings, which is the number to which NIPSCO reconciles and uses for forecasting going forward Q8. Please provide an example of how this works. A8. For the Appliance Recycling program, NIPSCO used the following approach. Step : NIPSCO used the Ohio Technical Resource Manual to determine the annualized deemed gross savings (,67 kwh). Then multiplied it by the existing nettogross ratio (.69) to determine the deemed net savings (,6 kwh). The deemed net savings was then used to forecast the savings for each measure. The number of measures were also forecasted and multiplied by the deemed net savings to determine an annualized savings number which is converted to monthly savings by dividing the annual savings by. Step : NIPSCO then used the 0 EM&V report to determine annualized expost gross savings of 77 kwh per refrigerator. The nettogross adjustment (.69) was used to determine the expost net savings (77 kwh x.69 = 9 kwh). The 9 kwh was multiplied by the EM&V verified number

168 Petitioner s Exhibit No. Page of refrigerators to determine the reconciled lost margin savings which is then converted to a monthly number by dividing by. Step : NIPSCO then calculated the difference between the reconciled savings and the previously collected savings to determine the total savings adjustment. NIPSCO forecasts lost revenues for measures projected to be installed utilizing the deemed savings per the appropriate technical resource manual but adjusts for the most current nettogross number. For measures previously installed, NIPSCO forecasts lost revenues utilizing the net ex post from the EM&V report as the deemed savings going forward Performance Incentives Q9. Please explain NIPSCO s request for recovery of performance incentives? A9. As Ms. Becker more fully explains, NIPSCO is requesting recovery of performance incentives, in the form of a shared savings mechanism. NIPSCO is proposing a shared savings mechanism in which customers will receive 8% of the net benefits of the programs and NIPSCO will receive the remaining %. The proposed shared savings mechanism is based on actual (expost) net savings as evaluated by an independent third party evaluator and will be applied to all programs except the Residential Low Income

169 Petitioner s Exhibit No. Page Qualified Appliance Replacement Program. NIPSCO s share of the shared savings would be treated as abovetheline for ratemaking purposes and included in the earnings test under the fuel adjustment clause ( FAC ). While NIPSCO is basing the calculation of incentives on the net present value ( NPV ) of the program benefits as determined by the Utility Cost test, the total amount recovered for each program will not exceed % of the total program costs. The calculation of shared savings for the proposed programs is shown in Petitioner s Exhibit No. C Q60. Why is NIPSCO proposing these percentages for the shared savings mechanism? A60. After over five years of providing energy efficiency programs to its customers, NIPSCO must work harder to achieve energy savings costeffectively. NIPSCO wants its customers to be the primary beneficiary of the program benefits, while also encouraging costeffective program implementation. NIPSCO modeled its shared savings mechanism after both Indianapolis Power and Light Company s and Indiana Michigan Power Company s performance incentives for their DSM programs, with some December 7, 0 Order in Cause No. 97 ( IPL DSM Order ). December, 0 Order in Cause No. 86.

170 Petitioner s Exhibit No. Page 6 nuances, wherein they both received approval from the Commission for a % shared savings mechanism. NIPSCO is also proposing a ceiling on the incentive amount to no more than % of the program costs, excluding administrative and EM&V costs Q6. How does NIPSCO propose to calculate the performance incentives? A6. The proposed shared savings mechanism is calculated as the NPV of Utility Cost Test ( UCT ) net benefits. The net benefits represent the difference between the costs avoided by implementing the energy efficiency programs (avoided electric capacity and energy) and the utilityincurred costs of the energy efficiency programs. The pretax performance incentive will be determined by multiplying the net savings, as determined by the UCT associated with each program (except the Low Income Appliance Replacement program) with a UCT greater than.0, by %. The independent, third party EM&V consultant will perform the calculations to determine the net benefits under the UCT. Depending on the total amount of net benefits provided by each program, NIPSCO will cap the total amount of shared savings recovered at % of the program budget, excluding administrative and EM&V costs. For example, in 06, the Residential

171 Petitioner s Exhibit No. Page 7 6 Lighting program is projecting $,7,66 in net benefits as determined by the UCT. Under the % incentive, the shared savings amount for that program would be $, without the cap. The projected program cost for the Residential Lighting program in 06 is $9,70. Therefore, the total amount NIPSCO would recover in performance incentives for that program is % of $9,70, which is $7, Q6. Why is NIPSCO proposing to use the UCT to calculate net benefits? A6. Utilizing the UCT as the measurement for the shared savings motivates the utility to control energy efficiency program administrative costs and participant incentive costs, thereby resulting in more costeffective programs for customers. By contrast, a large portion of the costs included in the Total Resource Cost test ( TRC ), especially the cost of the energy efficiency measures, are outside of the control of the utility. Utilizing the TRC as the measurement for the shared savings, a utility could provide programs that meet the TRC effectiveness standard, but that are not necessarily costeffective. 7 8 Q6. Why is NIPSCO pursuing a shared savings mechanism instead of a different incentive model?

172 Petitioner s Exhibit No. Page A6. The shared savings mechanism focuses on the costeffectiveness of the energy efficiency programs instead of the program expenditures. The shared savings incentive will be based on the net program savings based on independent evaluation as opposed to performance being measured by the achievement of annual gross energy savings targets. Ultimately, the incentive NIPSCO earns under the shared savings mechanism is based on how costeffectively the savings are achieved in the energy efficiency programs. As the Commission stated in the IPL DSM Order, We believe customers will benefit by a shareholder incentive mechanism that focuses on costeffectiveness, as opposed to one which focuses on expenditures to meet a target level of energy savings. NIPSCO is addressing the costeffectiveness issue while also placing appropriate limits on the amount of performance incentives gained from the programs. 6 7 Q6. How did NIPSCO project the performance incentives associated with its 0608 Electric EE Program? A6. NIPSCO determined the NPV of the net benefits as demonstrated through the UCT. NIPSCO then took % of those benefits as the estimated amount 97 Order at.

173 Petitioner s Exhibit No. Page of performance incentives to be recovered by NIPSCO as a shared savings with the ratepayers. This forecast was performed based on the planning numbers submitted by the vendors and the analysis conducted by Mr. Morgan. Petitioner s Exhibit No. C demonstrates both the % shared savings and the % program cost. NIPSCO is requesting recovery of the shared savings while not exceeding % of the program cost (excluding administrative and EM&V costs). The forecasted numbers demonstrate the lower amount of the two. NIPSCO requests to collect performance incentives on a projected basis, with reconciliation taking place after the EM&V results are received based on the actual NPV of the net benefits as demonstrated through the UCT. This will be determined by the EM&V vendor selected by the OSB. Ms. Becker provides additional explanation of why it is appropriate for NIPSCO to collect performance incentives as well as the proposed mechanism for collecting it through the DSMA mechanism Q6. Section 0 provides that if the Commission finds a plan to be reasonable, the electricity supplier shall be allowed to recover or receive reasonable financial incentives and lost revenues, which may be based on a reasonable forecast so long as a reconciliation method is included to

174 Petitioner s Exhibit No. Page correct for any variance. Does NIPSCO s mechanism include such a reconciliation? A6. Yes. NIPSCO s Energy Efficiency Program Costs are all reconciled based on actual costs and performance as determined by its EM&V report. In addition, NIPSCO reconciles the projected Energy Efficiency Program Costs and volumetric billing variances to the original revenue requirements based on actuals. 8 9 Q66. Does this complete your prepared direct testimony? A66. Yes.

175 VERIFICATION I, Victoria A. Vrab, Director of Demand Side Management Programs for, affirm under penalties of perjury that the foregoing representations are true and correct to the best of my knowledge, information and belief. Victoria A. Vrab Date: May 9, 0

176 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 NIPSCO DSM Potential Study All Sectors Final Results Presented 0900

177 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Overview All Sector Potential Residential Sector Potential Commercial Sector Potential Industrial Sector Potential Page

178 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Total All Sector Potential

179 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Baseline Projection and Potential Forecasts 0,000 8,000 6,000,000 Energy Consumption (GWh),000 0,000 8,000 6,000,000,000 Baseline Forecast Achievable Potential Economic Potential Technical Potential NIPSCO w/o DSM NIPSCO with DSM Page

180 Total Potential Annual Energy Savings Achievable energy savings are 90 GWh by 00,.% of the baseline forecast. Energy Savings (% of Baseline) % 0% % 0% % 0% Achievable Potential Economic Potential Technical Potential Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of Consumption Summary Baseline Forecast (GWh) 7, 7,08 7,76 7, 7,70 Cumulative Savings (GWh) Achievable Potential ,8 Economic Potential 6 76,,08,87 Technical Potential 9,77,70,8,9 Energy Savings (% of baseline) Achievable Potential 0.%.%.%.% 7.0% Economic Potential 0.7%.% 8.%.7% 6.% Technical Potential.% 7.%.% 8.%.% Page

181 Total Potential Summer Peak Savings Achievable summer peak demand savings are 0 MW by 00, 7.% of the baseline forecast. Peak Demand Savings (% of Baseline) 0% % 0% % 0% % 0% % Achievable Potential Economic Potential Technical Potential Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 6 of 8 0% Peak Demand Summary Baseline Forecast (MW).8,8,0,8,9 Cumulative Savings (MW) Achievable Potential Economic Potential Technical Potential ,0,7 Energy Savings (% of baseline) Achievable Potential 0.%.8%.% 7.% 9.% Economic Potential 0.8% 9.%.0% 6.% 9.% Technical Potential.%.% 7.6%.%.7% Page

182 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 7 of 8 Total Utility Cost Incremental Investment $60.0 Total Utility Cost Incremental Investment ($ millions) $0.0 Cost (million$) $0.0 $0.0 $0.0 $0.0 $ Residential Commercial Industrial Residential $. $.6 $. $6. $8. $8.7 $0. $0. $. $. $.8 $. $. $. $. $7. $9.6 $8.8 $0. $. $0. Commercial $7.9 $0.8 $. $0.0 $0. $8. $9. $9.6 $9.8 $0. $. $. $.8 $.0 $.6 $. $.6 $6. $6. $6.7 $7.7 Industrial $.9 $6.0 $7. $7. $. $.6 $.0 $.9 $.0 $. $. $.9 $.9 $6. $6. $6.6 $7.6 $8.6 $8.8 $9.0 $8.6 Grand Total $. $. $6.9 $. $.8 $9.8 $. $.8 $7. $7. $9. $. $.9 $. $.0 $9.0 $.7 $.6 $.7 $6.9 $6. Page 6

183 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 8 of 8 Residential Sector

184 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 9 of 8 Residential Market Profile Residential No. of Customers 0 Electricity Use (GWh) Avg. Use/Customer (kwh) Single Family 0,6,06 9,90 Multifamily 60,70,66 Mobile Home 6,90 7 6,768 Low Income 9,86,0 7,8 Total 0,68, 8, Intensity (kwh/hh),000 0,000 8,000 6,000,000,000 0 Cooling Space Heating Water Heating Interior Lighting Exterior Lighting Appliances Electronics Miscellaneous Electronics 9% Appliances 0% Exterior Lighting % Miscellaneous 0% Interior Lighting % Cooling % Space Heating 0% Water Heating % Page 8

185 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 0 of 8 Baseline Energy Projection by End Use Baseline load growth of % over 0 years Average annual growth of 0.7%,00,000,00 Annual Use (GWh),000,00,000,00, Cooling Heating Water Heating Interior Lighting Exterior Lighting Appliances Electronics Miscellaneous Page 9

186 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Baseline Projection and Potential Forecasts,00,000,00,000 Energy Consumption (GWh),00,000,00, Baseline Forecast Achievable Potential Economic Potential Technical Potential NIPSCO w/o DSM NIPSCO with DSM Page 0

187 Residential Potential Annual Energy Savings Achievable energy savings are 86 GWh by 00, 7.7% of the baseline forecast. Energy Savings (% of Baseline) % 0% % 0% % 0% % Achievable Potential Economic Potential Technical Potential Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 0% Consumption Summary Baseline Forecast (GWh),6,,7,7,9 Cumulative Savings (GWh) Achievable Potential Economic Potential Technical Potential 9 80,07,7 Energy Savings (% of baseline) Achievable Potential 0.9%.%.% 7.7% 9.9% Economic Potential.8% 9.8%.% 7.9%.6% Technical Potential.9%.8%.% 8.%.% Page

188 Rank Residential Potential Annual Energy Savings: Top Measures Measure / Technology 00 Cumulative Savings (GWh) % of Total Interior Lighting Screwin 69.9.% Water Heating Water Heater <= gal..% Behavioral Programs (OPower).8.% Exterior Lighting Screwin 6. 9.% Interior Lighting Specialty 7. 6.% 6 Refrigerator Remove Second Unit..% 7 Ducting Repair and Sealing 8.6.0% 8 Windows High Efficiency/ENERGY STAR 8..0% 9 Cooling Central AC 7.9.7% 0 Miscellaneous Furnace Fan 6..% Ceiling Fan Installation..9% Appliances Clothes Dryer.8.7% Electronics Personal Computers..% Heating AirSource Heat Pump.8.% Water Heater LowFlow Showerheads.6.% 6 Miscellaneous Dehumidifier..% 7 WholeHouse Fan Installation.9.0% 8 Appliances Freezer.9.0% 9 Freezer Remove Second Unit.8.0% 0 Room AC Removal of Second Unit. 0.8% Total % Exterior Lighting 9% Total Savings by End Use Appliances % Electronics % Petitioner's Exhibit No. A Miscellaneo us 7% Interior Lighting % 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Cooling % Water Heating 8% Substantial LED Screw In lighting potential. Heating % Page

189 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Residential Potential Annual Energy Savings Allocation of energy savings over time 00% 90% 80% 70% 60% 0% 0% 0% 0% 0% 0% Cooling Heating Water Heating Interior Lighting Exterior Lighting Appliances Electronics Miscellaneous Page

190 Residential Potential Summer Peak Savings Achievable summer peak demand savings are 80 MW by 00, 7.8% of the baseline forecast. Peak Demand Savings (% of Baseline Forecast) 0% % 0% % 0% % 0% % 0% Achievable Potential Economic Potential Technical Potential Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of Peak Demand Summary Baseline Forecast (MW) ,00,07 Cumulative Savings (MW) Achievable Potential Economic Potential Technical Potential Energy Savings (% of baseline) Achievable Potential 0.7%.0%.7% 7.8% 9.6% Economic Potential.%.% 8.8%.9% 6.% Technical Potential.% 9.9% 6.%.% 6.% Page

191 Rank Residential Potential Summer Peak Savings: Top Measures Measure / Technology 00 Cumulative Savings (MW) % of Total DR Direct Load Control Cooling.6.8% Cooling Central AC.8.8% Ducting Repair and Sealing 8.8.0% Behavioral Programs 8.8.0% Interior Lighting Screwin % 6 Water Heating Water Heater <= gal. 6.% 7 WholeHouse Fan Installation..% 8 Windows High Efficiency/ENERGY STAR..8% 9 Exterior Lighting Screwin..% 0 Room AC Removal of Second Unit..9% Refrigerator Remove Second Unit.8.% Interior Lighting Specialty.6.0% Cooling AirSource Heat Pump..% DR Direct Load Control Water Heat..% Ceiling Fan Installation.0.% 6 Miscellaneous Furnace Fan 0.9.% 7 Appliances Clothes Dryer % 8 Electronics Personal Computers % 9 Appliances Freezer % 0 Freezer Remove Second Unit % Total % Total Savings by End Use Appliances 6% Exterior Lighting % Interior Lighting % Water Heating 9% Petitioner's Exhibit No. A Heating 0% Electronics % 0 Integrated Resource Plan Appendix G AEG DSM Study 6 of 8 Miscellaneo us % Cooling 6% Residential Cooling DR provides the biggest share of peak savings Additional peak Cooling savings come from a mix of Economizers, VSD fans, and efficient equipment upgrades Page

192 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 7 of 8 Residential Potential Summer Peak Savings Allocation of peak savings over time 00% 90% 80% 70% 60% 0% 0% 0% 0% 0% 0% Cooling Heating Water Heating Interior Lighting Exterior Lighting Appliances Electronics Miscellaneous Page 6

193 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 8 of 8 Commercial Sector

194 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 9 of 8 Commercial Market Profile Commercial Square Feet 0 Electricity Use (GWh) Avg. Use/Sq Ft (kwh) Small Commercial 0,79,06,0.7 Large Commercial,0,78, Total 9,68,80, Miscellaneous 6% Intensity (kwh/sqft) Small Commercial Large Commercial Total Cooling Heating Ventilation Refrigeration Water Heating Interior Lighting Exterior Lighting Food Preparation Office Equipment Miscellaneous Food Preparation % Refrigeration % Exterior Lighting % Office Equipment 6% Interior Lighting % Cooling 8% Ventilation % Water Heating % Heating 6% Page 8

195 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 0 of 8 Baseline Energy Projection by End Use Baseline load growth of % over 0 years Average annual growth of 0.%,000,00 Annual Use (GWh),000,00,000,00,000,00, Cooling Heating Ventilation Water Heating Interior Lighting Exterior Lighting Refrigeration Food Preparation Office Equipment Miscellaneous Page 9

196 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Baseline Projection and Potential Forecasts,000,00,000,00 Energy Consumption (GWh),000,00,000,00, Baseline Forecast Achievable Potential Economic Potential Technical Potential NIPSCO w/o DSM NIPSCO with DSM Page 0

197 Commercial Potential Annual Energy Savings Achievable energy savings are GWh by 00, 8.% of the baseline forecast. Energy Savings (% of Baseline) % 0% % 0% % 0% % Achievable Potential Economic Potential Technical Potential Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 0% Consumption Summary Baseline Forecast (GWh),870,89,99,8,9 Cumulative Savings (GWh) Achievable Potential Economic Potential 8 8,066 Technical Potential ,,0 Energy Savings (% of baseline) Achievable Potential 0.%.%.% 8.% 0.6% Economic Potential 0.6%.6%.% 0.%.8% Technical Potential.0% 0.% 9.8% 7.6%.7% Page

198 Rank Commercial Potential Annual Energy Savings: Top Measures Measure / Technology 00 Cumulative Savings (GWh) % of Total Interior Lighting Linear Fluorescent 80..0% HVAC Economizer. 7.% Water Heating Water Heater.7 7.% Office Equipment Desktop Computer. 7.% Cooling WaterCooled Chiller. 7.% 6 Interior Lighting Screwin 9..7% 7 Interior Lighting Daylighting Controls..6% 8 Interior Lighting HighBay Fixtures.8.% 9 Retrocommissioning.6.8% 0 Exterior Lighting HID 0..% Interior Fluorescent Delamp and Install Reflectors 9.7.9% Chiller Chilled Water Reset 8.6.6% Exterior Lighting Linear Fluorescent.6.% Cooling AirCooled Chiller..% Office Equipment Server.9.% 6 Cooling RTU.7.% 7 Office Equipment Laptop.7.% 8 Insulation Wall Cavity..% 9 Exterior Lighting Screwin. 0.9% 0 RTU Maintenance.0 0.9% Total % Total Savings by End Use Food Preparation Refrigeratio % n % Exterior Lighting % Petitioner's Exhibit No. A Office Equipment 0% Interior Lighting % 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Miscellane ous 0% Cooling % Substantial LED Linear Fluorescent lighting potential. Cooling savings come from a mix of Economizers, VSD fans, and efficient equipment upgrades Heating % Ventilation % Water Heating 9% Page

199 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of 8 Commercial Potential Annual Energy Savings Allocation of energy savings over time 00% 90% 80% 70% 60% 0% 0% 0% 0% 0% 0% Cooling Heating Ventilation Water Heating Interior Lighting Exterior Lighting Refrigeration Food Preparation Office Equipment Miscellaneous Page

200 Commercial Potential Summer Peak Savings Achievable summer peak demand savings are 70 MW by 00, 9.7% of the baseline forecast. Peak Demand Savings (% of Baseline Forecast) % 0% % 0% % 0% % 0% % 0% Achievable Potential Economic Potential Technical Potential Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study of Peak Demand Summary Baseline Forecast (MW) Cumulative Savings (MW) Achievable Potential Economic Potential 69 Technical Potential Energy Savings (% of baseline) Achievable Potential 0.%.6% 6.% 9.7%.% Economic Potential 0.7% 7.0%.6% 9.8%.% Technical Potential.%.% 9.% 6.7%.8% Page

201 Rank Commercial Potential Summer Peak Savings: Top Measures Measure / Technology 00 Cumulative Savings (MW) % of Total Interior Lighting Linear Fluorescent. 7.7% DR Curtailment Agreements 8.9.8% HVAC Economizer 8..7% Cooling WaterCooled Chiller 7. 0.% Interior Lighting Screwin.9.% 6 Retrocommissioning.9.% 7 Cooling RTU.8.0% 8 Water Heating Water Heater.8.0% 9 Office Equipment Desktop Computer.6.7% 0 Interior Lighting Daylighting Controls..% Interior Lighting HighBay Fixtures..% RTU Maintenance.7.% Cooling AirCooled Chiller.7.% Chiller Chilled Water Reset..% Interior Fluorescent Delamp and Install Reflectors..0% 6 DR Interruptible Tariffs 0.9.% 7 Cooling Room AC 0.7.% 8 Ventilation ECM on VAV Boxes % 9 Chiller VSD on Fans % 0 Insulation Ducting % Total % Total Savings by End Use Exterior Lighting 0% Refrigeratio n % Water Heating % Petitioner's Exhibit No. A Food Preparation % Interior Lighting % Office Equipment 8% 0 Integrated Resource Plan Appendix G AEG DSM Study 6 of 8 Cooling 6% Heating 0% Cooling savings come from a mix of Economizers, VSD fans, and efficient equipment upgrades Miscellaneo us 0% Ventilation % Page

202 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 7 of 8 Commercial Potential Summer Peak Savings Allocation of peak savings over time 00% 90% 80% 70% 60% 0% 0% 0% 0% 0% 0% Cooling Heating Ventilation Water Heating Interior Lighting Exterior Lighting Refrigeration Food Preparation Office Equipment Miscellaneous Page 6

203 Petitioner's Exhibit No. A 0 Integrated Resource Plan Appendix G AEG DSM Study 8 of 8 Industrial Sector

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