Pays
10 Allen Street, Boston, MA 02131-3718
617-645-4018 fax: 617-327-6986
May 19, 2006 via email
James Volz, Chair, VPSB
David C. Coen, Member, VPSB
John D. Burke, Member, VPSB
David O’Brien, Commissioner, VPSD
RE: Vermont Electric Energy Efficiency Potential Study/Budgets
Dear Board Members and Commissioner:
On May 10, I sent a letter commenting on the GDS Associates, Inc. draft Vermont
Electric Energy Efficiency Potential Study. In this letter, I would like to turn specifically to budget issues and clarify and expand on several points that I made in my previous letter.
First, however, I want to disavow a statement I made in my previous letter (sixth paragraph). I wrote: “…as GDS suggests, expenditures in Vermont are high for the results they produce.” In making this statement I was relying on information in the GDS report, which I now have reason to question. The report states that cumulative savings were “4.6% of 2005 annual kWh sales in Vermont” (p. 3) and later (Fig. 1-1, p.14) the report indicates for the other twenty states reviewed, all had higher (in some cases much higher) savings results. I have since learned that while the numbers presented for
Vermont reflected five-year cumulative savings, for the other states the savings might be based on cumulative savings for twenty-five years or more. If this is true, it’s not a fair comparison, and I will not stand behind that conclusion.
Turning to the budget, I first want to emphasize that PAYS America, Inc. is fully committed to the achievement of the maximum cost-effective energy efficiency. PAYS
America supports societal investment in energy efficiency; indeed, PAYS® can help maximize such investment throughout the country. My comments about holding the
EEU budget to the current level were an expression of my belief that PAYS® will produce the same savings as rebate programs for a much lower cost to ratepayers, and

EEU Budget
PAYS America, Inc. Comments
May 19, 2006 p. 2 that PAYS® will do so even at a lower societal cost. The recommendation also reflected a concern that ramping up current programs might undermine the ability to change course should a PAYS® pilot confirm its value to Vermont.
However, after discussions with a number of interested persons in the last week, I now believe that giving PAYS® a fair chance to show its potential to Vermont need not come at the expense of achievable savings from other programs, while it is being tried out. In fact, many of the systems, mechanisms, and protocols that currently constitute Vermont’s
EEU programs can be used in a PAYS® system. So I wish to withdraw my recommendation that the EEU budget be held constant other than the money for a serious pilot of PAYS®, and move more directly to the question of how to test the PAYS® promise. I am confident PAYS® will work, and that it will quickly show its promise to produce savings at lower cost to the general ratepayer if properly piloted. At the same time, I realize that, until the state has proof that PAYS® can do as much or more for less ratepayer spending, it would be wasteful to not pursue all cost-effective efficiency opportunities in the interim.
Turning to the details of a PAYS® pilot budget proposal, I wish to address two issues.
First, why do I recommend a budget item of $1 million to mount this effort, and where would the money be spent? Second, how does the recommendation that the budget include this $1 million PAYS® line item relate to the present EEU performance-based contract?
The $1 million of earmarked funding should be set aside for Efficiency Vermont to develop a PAYS® pilot program with one or two utilities. Efficiency Vermont should have the pilot operational by January 2007 and a report on its results available by January
2008. We would recommend a pilot that initially addresses commercial and residential new construction.
1
New construction is an area where many opportunities to lock in savings in a building are forgone if the efficiency is not built into the design and construction. I believe that PAYS® can prove more successful in this area than traditional rebate and education programs. The designers of the PAYS® model, Harlan
Lachman and Paul Cillo (of Colchester and Hardwick, respectively), have developed a variant of PAYS® designed specifically to overcome the persistent market barriers to efficiency in new construction.
The pilot funds should be used to design Vermont-specific pilots, to develop program forms and contracts, to pay for Efficiency Vermont pilot start-up costs, to cover costs of arranging suitable financing, and to fund technical assistance, the adaptation of utility management information, billing and payment systems, and the training of utility customer service staff. Funds should also be used to develop and implement an
1 There has been some discussion of piloting PAYS® with very large accounts. While PAYS® would enable such customers to purchase efficiency measures they would otherwise not purchase, there are a number of technical issues unique to these customers that could impact the flow of capital. I recommend that we not complicate Vermont’s first test of PAYS® by having to resolve these issues.

EEU Budget
PAYS America, Inc. Comments
May 19, 2006 independent and reliable evaluation of the pilot, both from the process and impact perspectives. p. 3
I ask that the Board address this question explicitly in the Order and in the anticipated renegotiated contract with VEIC pursuant to the new budget. VEIC’s current contract has no funds for pilots or for research and development. It would not be fair to VEIC to expect it to dilute the yield of its current and planned programs with a $1 million expenditure, the primary object of which is research and development (although, of course, I fully expect that PAYS® to achieve savings under the pilot). But the efficiency utility should be able to mount carefully crafted R&D efforts whose objective is to try out innovative ways of achieving the same or greater efficiency at lower total cost, without having to include the cost in their performance-based remuneration formula.
If you have any questions about this letter or about how a PAYS® pilot could help put
Vermont on a the path to realizing all of its achievable cost-effective savings at significantly less cost to general ratepayers, please contact me.
Sincerely,
Nancy Brockway
Nancy Brockway
Chair, PAYS America, Inc. cc. Efficiency Vermont
Beth Sachs, Executive Director bsachs@veic.org
Paul A. Cillo
Vice-President
Energy Efficiency Institute
165 Goodsell Point
Colchester, VT 05446 paul@eei.vt.com
J. Riley Allen, Director, VPSD
Riley.allen@state.vt.us