To:Jonathan Raab, Paul Centolella, Docket 4600 Stakeholders

Memorandum

To:Jonathan Raab, Paul Centolella, Docket 4600 Stakeholders

From:Tim Woolf and Jenn Kallay on behalf of the Division

Date:November 17, 2016

Re:Docket 4600: Cost-Effectiveness Matrix – Treatment of Low-Income Benefits

Draft – For Discussion Purposes

1. Introduction

The purpose of this memo is to provide some clarity on the low-income benefits that should be included in the Docket 4600 cost-effectiveness analyses. The current energy efficiency cost-effectiveness approach in RI already accounts for all benefits at the utility and participant level, including non-energy benefits, but does not include societal level benefits. For completing the RI CE Matrix, the main things we need to do are to (a) clarify what utility and participant LI benefits are included in the EE framework, (b) identify what, if anything should be included in the societal framework, and (c) propose a methodology for estimating the societal benefits. Of course, there should be no double-counting.

2. Utility System Low-Income Non-Energy Benefits

Table 1 below shows the LI non-energy benefits that accrue to the utility system that are currently included in the RI energy efficiency cost-effectiveness methodology. We recommend that these types of benefits be included in the 4600 cost-effectiveness framework. The values may be different by resource type, but the types are relevant to all distributed energy resources.

Table 1. LI Non-Energy Benefits that Accrue to the Utility System

Source: National Grid 2017 EE Plan Technical Reference Manual

3. Participant Low-Income Non-Energy Benefits

Table 2 below shows the LI non-energy benefits that accrue to customers participating in programs currently that are included in the RI energy efficiency cost-effectiveness methodology. We recommend that these types of benefits be included in the 4600 cost-effectiveness framework. The values may be different by resource type, but the types are relevant to all distributed energy resources.

Note that under the Total Resource Cost test (and the Societal Cost test), the reduction in participant bills is not included as a participant benefit. Instead, avoided utility system costs are used to represent these benefits to participants in LI programs. These benefits are equivalent to those that are included in the cost-effectiveness analysis for non-LI customers.

Table 2. LI Non-Energy Benefits that Accrue to Program Participants

Source: National Grid 2017 EE Plan Technical Reference Manual

4. Societal Low-Income Benefits

The remaining question is: Are there additional societal benefits of LI efficiency programs? These societal benefits must be additional to those listed above for the utility and the participant.

The one benefit that comes to mind is the benefit of LI customers having reduced energy bills. This benefit could be call a reduced energy burden, increased LI security, or reduced regressivity in rates. (We prefer reduced energy burden.)

This raises several questions.

1. Is reduced LI energy burden already reflected in LI participant benefits listed above in Table 2? (We think the answer is no. Note that reduced energy bills are not included in the benefits or non-energy benefits.)
2. Is the reduced energy burden a participant benefit, or a societal benefit? (We think the answer is that it is a societal benefit.)
3. If there is an incremental, societal benefit associated with reduced energy burden, then how should it be valued? (We propose a qualitative adder to the utility benefits.)

Synapse Energy Economics, Inc.Docket 4660: Cost-Effectiveness – Low-Income Benefits Page 1