Vermont-VEIC 2006-2008 Contract for EEU
ATTACHMENT C
PERFORMANCE INCENTIVE MECHANISM
I. Overview
The Contractor and the Board agree that a portion of payments to the Contractor shall be
based on the Contractor’s performance in achieving the Board’s objectives and successfully
delivering the strategies and initiatives described in the Scope of Work. The performance
incentive mechanism is designed to reward superior performance by the Contractor in the
overall administration and delivery of energy efficiency services that achieve specific
resource acquisition outcomes and market transformation goals.
For the period January 1, 2006 through December 31, 2008, the Contractor can earn up to
$1,995,000 in Performance Awards for meeting the 100% Target Level for program
performance indicators that are defined in this Attachment. Table C-1 shows the dollar
amount allocated to each indicator, if the Contractor achieves each indicator’s 100% Target
Level.1
For the same period, the Contractor can earn additional Performance Awards if the
Contractor exceeds the 100% Target Level for performance indicators one, two, three, four,
five, or six as identified in Tables C-1 and C-3. The maximum amount of Performance
Awards that the Contractor can earn for the period January 1, 2006 through December 31,
2008, is $2,347,000.
The schedule and processes for documenting and verifying achievement of performance
indicators are outlined in Paragraph V of this Attachment. The Contractor shall submit
claims for Performance Awards. The DPS and/or the Contract Administrator will verify the
Contractor’s claims. The Contract Administrator will make recommendations regarding all
Performance Awards to the Board.
Payment of any earned Performance Awards for the period January 1, 2006 through
December 31, 2008 (up to a maximum of $2,347,000) shall be made by July 1, 2009.
The performance incentive mechanism is subject to a set of five minimum performance
requirements, which are summarized in Tables C-4 and C-5. The final amount of
Performance Awards granted to Contractor will be subject to achievement of these minimum
performance requirements and will be adjusted in accordance with Paragraph IV should the
Contractor fail to meet any of the minimum performance requirements.
1
However, if a significant customer, or a significant number of customers, explores specific energy
efficiency projects with Contractor and then decides not to receive incentive payments from
Contractor so that the customer(s) can apply for an EEC exemption using the mechanism described in
the EEC Exemption Order, then upon the Contractor’s request, the Board and the Contractor will
engage in further discussions regarding the agreed-upon 100% Target Level for the affected
performance indicators.
C-1
Vermont-VEIC 2006-2008 Contract for EEU
II. Description of Performance Indicators
The Contractor is eligible to earn an incentive for superior performance in certain specified
areas. This section provides a more detailed description of individual performance
indicators, their weights as a percentage of the total Performance Award at the 100% Target
Level, their individual 100% Target Levels, their minimum thresholds, and the scaling
between their thresholds and their 100% Target Levels. The threshold and scaling for each
indicator are summarized in Table C-2.
A. Cumulative Annual Electricity Savings
1. Weighting
The overall weight for this performance indicator is 30% of the Contractor’s total
maximum Performance Award at the 100% Target Level ($1,995,000 * 0.30 =
$598,500).
2. 100% Target Level
For the period January 1, 2006 through December 31, 2008, the 100% Target Level
for this indicator (also known as the Electricity Savings Target) is 262,031 MWh (at
generation and net of free riders).2 The Electricity Savings Target measures the sum
of annualized first-year savings achieved by implementation of all EEU strategies and
initiatives, except for the Customer Credit initiative, during the period 1/1/2006
through 12/31/2008.
During the contract period the Electricity Savings Target will be adjusted to reflect
changes in Contractor EEU Funds that might occur, consistent with the limitation set
forth in Paragraph 8 of the Main Body. Specifically, the Electricity Savings Target
will be increased (or decreased) by 4.42 MWh per $1,000 of increase (or decrease) in
Contractor EEU Funds.
3. Threshold and Scaling Up to 100% Target Level
The Contractor shall be eligible to receive a Performance Award for this indicator
only if the Board determines that the Contractor successfully achieves and
documents Electricity Savings above a specified threshold. The threshold is set at
80% of the Electricity Savings Target or 210,529MWh.
If the Contractor achieves 80% of its Electricity Savings Target, it can earn $299,250
(50% of the amount it would earn if it achieved 100% of its Electricity Savings
Target). The Performance Award shall be scaled linearly between 80% and 100% of
the actual Electricity Savings as detailed in Paragraph II.A.4.
Results from services implemented by BED shall not be counted towards the Contractor’s performance for the
purposes of determining any Performance Awards under this Contract. In addition, results from activities
implemented by the Contractor pursuant to Paragraph II.P of Attachment A shall not be counted towards the
Contractor’s performance for the purposes of determining any Performance Awards. Any results from activities
implemented with funds from other sources (e.g., grants, Vermont Gas Systems), except for savings from activities
implemented with funds from Vermont electric utilities pursuant to Paragraph II.P of Attachment A, shall be
counted toward the Contractor’s performance for the purposes of determining Performance Awards.
2
C-2
Vermont-VEIC 2006-2008 Contract for EEU
4.
Performance Award Up to 100% Target Level
The Contractor’s Performance Award shall be:

$0 if verified cumulative annual Electricity Savings are less than 210,529 MWh.

$299,250 for achieving 210,529 MWh (80% of the 100% Target Level) plus
$5.810 per MWh for verified cumulative annual Electricity Savings between
210,529 MWh and 262,031MWh.
B. Total Resource Benefits
This incentive is designed to encourage the Contractor to maximize energy-related and
other resource benefits in implementing energy-efficiency measures and projects during
their economic lifetime.
1. Weighting
The overall weight for this performance indicator is 24% of the Contractor’s total
maximum Performance Award at the 100% Target Level ($1,995,000 * 0.24 =
$478,800).
2. 100% Target Level
For the period 1/1/2006 through 12/31/2008, the 100% Target Level for this indicator
(also known as the Total Resource Benefits (“TRB”) Target) is $225,392,772 (in
year-2006 dollars). The TRB Target measures the cumulative TRB achieved by
implementation of all EEU services and initiatives except the Customer Credit
initiative. The TRB for any given service is defined as the present value (in year2006 dollars) of lifetime net resource savings in electricity, fossil fuel, and water,
which are valued at current projections of avoided resource costs.3 Avoided costs do
not include environmental or any other externalities (e.g., indirect economic benefits),
such as the 0.7 cents/kWh value stipulated in ¶ 51 of the MOU.
During the contract period the TRB Target will be adjusted to reflect changes in
Contractor EEU Funds that might occur, consistent with the limitation set forth in
Paragraph 8 of the Main Body. Specifically, the TRB Target will be increased (or
decreased) by $3,803 (in 2006 dollars) per $1,000 of increase (or decrease) in
Contractor EEU Funds.
3. Threshold and Scaling Up to 100% Target Level
The Contractor shall be eligible to receive a Performance Award for this indicator
only if the Board determines that the Contractor successfully achieves and
documents TRB above a specified threshold. The threshold is set at 70% of the TRB
Target or $158,638,543.
3
TRB does not include measure costs, or any other costs or benefits to customers (e.g., productivity
increases, changes in O&M costs).
C-3
Vermont-VEIC 2006-2008 Contract for EEU
If the Contractor achieves 70% of its TRB Target, it can earn $239,400 (50% of the
amount it would earn if it achieved 100% of its TRB Target). The Performance
Award shall be scaled linearly between 70% and 100% of the actual TRB, as
detailed in Paragraph II.B.4.
4. Performance Award Up to 100% Target Level
The Contractor’s Performance Award shall be:

$0 if verified TRB are less than $158,638,543.

$239,400 for achieving TRB of $158,638,543 (75% of the 100% Target Level)
plus $0.003586 per TRB Dollar for verified TRB between $158,638,543 and
$225,392,772.
C. Summer Peak Demand Savings
This performance incentive is designed to encourage the Contractor to achieve superior
levels of peak summer demand savings in addition to annual energy savings and total
resource benefits.
1. Weighting
The overall weight for this performance indicator is 7% of the Contractor’s total
maximum Performance Award at the 100% Target Level ($1,995,000 * .07 =
$139,650).
2. 100% Target Level
For the period 1/1/2006 through 12/31/2008, the 100% Target Level for this indicator
(also known as the Summer Peak Demand Savings Target) is 37,702 kW. The
Summer Peak Demand Savings Target measures the cumulative annual summer peak
demand savings achieved by implementation of all EEU services and initiatives
except the Customer Credit initiative. Peak summer demand savings are reductions
in Vermont's diversified electric demand (in kilowatts, kW) that coincide with the
regional power market's peak load periods in the summer as defined by ISO-NE.
During the contract period the Summer Peak Demand Savings Target will be adjusted
to reflect changes in Contractor EEU Funds that might occur, consistent with the
limitation set forth in Paragraph 8 of the Main Body. Specifically, the Summer Peak
Demand Savings Target will be increased (or decreased) by 0.636 kW per $1,000 of
increase (or decrease) in Contractor EEC Funds.
3. Threshold and Scaling Up to 100% Target Level
The Contractor shall be eligible to receive a Performance Award for this indicator
only if the Board determines that the Contractor successfully achieves and
documents Summer Peak Demand Savings above a specified threshold. The
threshold is set at 76% of the Summer Peak Demand Savings Target or 28,625kW.
C-4
Vermont-VEIC 2006-2008 Contract for EEU
If the Contractor achieves 76% of its Summer Peak Demand Savings Target, it can
earn $69,825 (50% of the amount it would earn if it achieved 100% of its Summer
Peak Demand Savings Target). The Performance Award shall be scaled linearly
between 76% and 100% of the Summer Peak Demand Savings Target, as detailed in
Paragraph II.C.4.
4. Performance Award Up to 100% Target Level
The Contractor’s Performance Award shall be:

$0 if verified Summer Peak Demand Savings are less than 28,625 kW.

$69,825 for achieving Summer Peak Demand Savings of 28,625 kW (76% of the
100% Target Level) plus $7.693 per kW for verified cumulative annual Summer
Peak Demand Savings between 28,625 kW and 37,702 kW.
D. Winter Peak Demand Savings
This performance incentive is designed to encourage the Contractor to achieve superior
levels of peak winter demand savings in addition to annual energy savings and total
resource benefits.
1. Weighting
The overall weight for this performance indicator is 5% of the Contractor’s total
maximum Performance Award at the 100% Target Level ($1,995,000 * .05 =
$99,750).
2. 100% Target Level
For the period 1/1/2006 through 12/31/2008, the 100% Target Level for this indicator
(also known as the Winter Peak Demand Savings Target) is 41,492 kW. The Winter
Peak Demand Savings Target measures the cumulative annual winter peak demand
savings achieved by implementation of all EEU services and initiatives except the
Customer Credit initiative. Peak winter demand savings are reductions in Vermont's
diversified electric demand (in kilowatts, kW) that coincide with the regional power
market's peak load periods in the winter as defined by ISO-NE.
During the contract period the Winter Peak Demand Savings Target will be adjusted
to reflect changes in Contractor EEC Funds that might occur, consistent with the
limitation set forth in Paragraph 8 of the Main Body. Specifically, the Winter Peak
Demand Savings Target will be increased (or decreased) by 0.700 kW per $1,000 of
increase (or decrease) in Contractor EEU Funds.
3. Threshold and Scaling Up to 100% Target Level
The Contractor shall be eligible to receive a Performance Award for this indicator
only if the Board determines that the Contractor successfully achieves and
documents Winter Peak Demand Savings above a specified threshold. The threshold
is set at 75% of the Winter Peak Demand Savings Target or 30,899 kW.
C-5
Vermont-VEIC 2006-2008 Contract for EEU
If the Contractor achieves 75% of its Winter Peak Demand Savings Target, it can
earn $49,875 (50% of the amount it would earn if it achieved 100% of its Winter
Peak Demand Savings Target). The Performance Award shall be scaled linearly
between 75% and 100% of the Winter Peak Demand Savings Target, as detailed in
Paragraph II.D.4.
4. Performance Award Up to 100% Target Level
The Contractor’s Performance Award shall be:

$0 if verified Winter Peak Demand Savings are less than 30,899 kW.

$49,875 for achieving Winter Peak Demand Savings of 30,899 kW (75% of the
100% Target Level) plus $4.708 per kW for verified cumulative annual Winter
Peak Demand Savings between 30,899 kW and 41,492 kW.
E. Summer Peak Demand Savings in Certain Geographic Areas
This performance incentive is designed to encourage the Contractor to achieve superior
levels of peak summer demand savings in portions of Chittenden County; the
Newport/Derby area; and St. Albans City/Town as generally described by the Board in
the Geographic Targeting Order.
1. Weighting
The overall weight for this performance indicator is 10% of the Contractor’s total
maximum Performance Award at the 100% Target Level ($1,995,000 * .10 =
$199,500).
2. 100% Target Level
For the period 7/1/2007 through 12/31/2008, the 100% Target Level for this indicator
is 7,200 kW. The Summer Peak Demand Savings in Certain Geographic Areas
measures the sum total of all summer peak capacity reductions in the geographic
areas designated in Paragraph II.E, above. It includes all of the cumulative annual
summer peak demand savings achieved by implementation of all EEU services and
initiatives within the above referenced-geographic areas except the Customer Credit
initiative.
During the contract period the Summer Peak Demand Savings in Certain Geographic
Areas Target will be adjusted to reflect changes in Contractor EEC Funds that might
occur, consistent with the limitation set forth in Paragraph 8 of the Main Body.
Specifically, the Summer Peak Demand Savings in Certain Geographic Areas Target
will be increased (or decreased) by 0.1215 kW per $1,000 of increase (or decrease) in
Contractor EEU Funds.
3. Threshold and Scaling Up to 100% Target Level
The Contractor shall be eligible to receive a Performance Award for this indicator
only if the Board determines that the Contractor successfully achieves and
documents Summer Peak Demand Savings in Certain Geographic Areas above a
C-6
Vermont-VEIC 2006-2008 Contract for EEU
specified threshold. The threshold is set at 50% of the Summer Peak Demand
Savings in Certain Geographic Areas Target or 3,600 kW.
If the Contractor achieves 50% of its Summer Peak Demand Savings in Certain
Geographic Areas Target, it can earn $99,750 (50% of the amount it would earn if it
achieved 100% of its Summer Peak Demand Savings Target). The Performance
Award shall be scaled linearly between 50% and 100% of the Summer Peak Demand
Savings in Certain Geographic Areas Target, as detailed in Paragraph II.E.4.
4. Performance Award Up to 100% Target Level
The Contractor’s Performance Award shall be:

$0 if verified Summer Peak Demand Savings in Certain Geographic Areas are
less than 3,600 kW.

$99,750 for achieving Summer Peak Demand Savings in Certain Geographic
Areas of 3,600 kW (50% of the 100% Target Level) plus $27.708 per kW for
verified Summer Peak Demand Savings in Certain Geographic Areas between
3,600 kW and 7,200 kW.
F. Winter Peak Demand Savings in Geographic Areas
This performance incentive is designed to encourage the Contractor to achieve
superior levels of peak winter demand savings in the Southern Loop and
Newport/Derby as generally described by the Board in the Geographic Targeting
Order.
1. Weighting
The overall weight for this performance indicator is 10% of the Contractor’s total
maximum Performance Award at the 100% Target Level ($1,995,000 * .10 =
$199,500).
2. 100% Target Level
For the period 7/1/2007 through 12/31/2008, the 100% Target Level for this indicator
is 7,740 kW. The Winter Peak Demand Savings in Certain Geographic Areas
measures the sum total of all winter peak capacity reductions in the geographic areas
designated in Paragraph II.F, above. It includes all of the cumulative annual winter
peak demand savings achieved by implementation of all EEU services and initiatives
within the above referenced-geographic areas except the Customer Credit initiative.
During the contract period the Winter Peak Demand Savings in Certain Geographic
Areas Target will be adjusted to reflect changes in Contractor EEC Funds that might
occur, consistent with the limitation set forth in Paragraph 8 of the Main Body.
Specifically, the Winter Peak Demand Savings in Certain Geographic Areas Target
will be increased (or decreased) by 0.1306 kW per $1,000 of increase (or decrease) in
Contractor EEU Funds.
C-7
Vermont-VEIC 2006-2008 Contract for EEU
3. Threshold and Scaling Up to 100% Target Level
The Contractor shall be eligible to receive a Performance Award for this indicator
only if the Board determines that the Contractor successfully achieves and
documents Winter Peak Demand Savings in Certain Geographic Areas above a
specified threshold. The threshold is set at 50% of the Winter Peak Demand Savings
in Certain Geographic Areas Target or 3,870 kW.
If the Contractor achieves 50% of its Winter Peak Demand Savings in Certain
Geographic Areas Target, it can earn $99,750 (50% of the amount it would earn if it
achieved 100% of its Winter Peak Demand Savings Target). The Performance
Award shall be scaled linearly between 50% and 100% of the Winter Peak Demand
Savings in Certain Geographic Areas Target, as detailed in Paragraph II.F.4.
4. Performance Award Up to 100% Target Level
The Contractor’s Performance Award shall be:

$0 if verified Winter Peak Demand Savings in Certain Geographic Areas are less
than 3,870 kW.

$99,750 for achieving Winter Peak Demand Savings in Certain Geographic Areas
of 3,870 kW (50% of the 100% Target Level) plus $25.775 per kW for verified
Winter Peak Demand Savings in Certain Geographic Areas between 3,870 kW
and 7,740 kW.
G. Stocking of Compact Fluorescent Light Bulbs by Grocery Stores
This indicator is designed to encourage the Contractor to pursue placement of quality
energy efficient lighting products (CFLs) to be sold at prices that are acceptable to
consumers within large retail grocery operations in Vermont.
The Contractor will obtain participation agreements to be in effect during part of both
2007 and 2008 with independent grocery stores or chains representing at least 40 distinct
“large” retail grocery locations within Vermont. A large retail grocery store location for
the purposes of this performance indicator is one that has been identified as having at
least 25 employees at that location. A location is a specific store site located within
Vermont.
A participation agreement is defined as either 1) a written agreement between the
Contractor and the retailer for the retailer to sell CFLs and offer EEU retail coupons to
customers to reduce the price of the products; or 2) a negotiated manufacturer buydown
or retailer markdown signified by a written agreement for the sale of specified numbers
of selected CFLs at locations agreed upon between the Contractor and the manufacturer
and/or retailer.
These participation agreements must represent at least one retail grocery location for each
of the three major grocery store chains that operate in Vermont. As of the start of the
C-8
Vermont-VEIC 2006-2008 Contract for EEU
Term of this Agreement the three major grocery store chains are Hannaford, Price
Chopper and Shaw’s.
In addition to having participation agreements in place, each qualifying retail grocery
location must also demonstrate evidence of CFL sales between August 1, 2008 and
December 31, 2008.
1. Weighting
The overall weight for this performance indicator is 7% of the Contractor’s total
maximum Performance Award at the 100% Target Level ($1,995,000 * .07 =
$139,650).
2. 100% Target Level
To reach the 100% Target Level for this indicator (also known as the Grocery Store
Target) the Contractor must achieve the following:
 participation agreements in effect for at least some period of both 2007
and 2008 for at least 40 retail grocery locations; and
 within the above retail grocery locations at least one agreement must
be in place for a retail grocery location for each of the following
grocery store chains: Hannaford, Price Chopper and Shaw’s; and
 demonstrated CFL sales between August 1, 2008 and December 31,
2008 for each of the above retail grocery locations.
3. Threshold
The Contractor will earn 60% of the award if it achieves the following:
 participation agreements in effect for at least some period of both 2007
and 2008 for at least 40 retail grocery locations; and
 within the above retail grocery locations at least one agreement must
be in place for a retail grocery location for two of the following
grocery store chains: Hannaford, Price Chopper and Shaw’s; and
 demonstrated CFL sales between August 1, 2008 and December 31,
2008 for each of the above retail grocery locations.
There is no scaling for this performance indictor.
4. Performance Award
The Contractor’s Performance Award shall be:

$0 if fewer than 40 grocery store locations are verified as participating, or if fewer
than two of the three identified grocery store chains participate.

$83,790 if all the requirements are met for the 100% Target Level except that only
two of the three identified grocery store chains participate.
C-9
Vermont-VEIC 2006-2008 Contract for EEU

$139,650 if all the requirements detailed above for the 100% Target Level are
met.
H. Community Awareness
This indicator is designed to encourage the Contractor to conduct community-based
educational and promotional activities with the goal of achieving high levels of
participation and energy savings in individual communities.
1. Weighting
The overall weight for this performance indicator is 7% of the Contractor’s total
proposed Performance Award at the 100% Target Level ($1,995,000 * .07 =
$139,650).
2. 100% Target Level
The Contractor’s Community Awareness Target for this performance indicator is
35% community participation (as defined in Paragraph V.C.3, below) in the Village
of Northfield and the Town of Hardwick. In at least one of these two communities,
there will also be a target of achieving a three percent reduction in community-wide
electrical energy use. (See Paragraph II.H.4, below.)
3. Threshold and Scaling Up to 100% Target Level
The Contractor shall receive 50% of the Performance Award if the Board determines
that the Contractor successfully achieves the targeted 35% participation rate in the
two designated communities and a minimum threshold reduction of one percent in
electrical energy use in one of the designated communities. The Performance Award
shall be scaled linearly between 50% and 100% for achievement of electrical energy
savings between the one percent minimum threshold and the three percent 100%
Target Level in one of the designated communities.
4. Performance Award
The Contractor’s Performance Award shall be:

$0 if the Contractor does not achieve at least 35 percent community participation
in the two designated communities, or if neither designated community
demonstrates the minimum threshold reduction of one percent in community-wide
electrical energy use; and

$69,825 if the Contractor achieves at least 35 percent community participation in
the two designated communities, at least one of which demonstrates the minimum
threshold reduction of one percent in community-wide electrical energy use.

A scaled amount between $69,825 and $139,650 for community-wide electrical
energy savings between the one percent minimum threshold and the three percent
100% Target Level in one of the designated communities, provided that the
C - 10
Vermont-VEIC 2006-2008 Contract for EEU
Contractor has also achieved at least 35 percent community participation in the
two designated communities.
I. Revised Avoided Cost Projections, Costing Periods and Line Loss Factors
The Board approved revised avoided cost projections, costing periods and line loss
factors on November 21, 2006. The Contractor began using these new avoided costs,
costing periods and line loss factors by July 1, 2007. The Board and the Contractor have
executed a contract amendment to modify the Electricity Savings Target, the TRB Target,
the Winter Peak Demand Savings Target, the Summer Peak Demand Savings Target,
Winter Peak Demand Savings in Certain Geographic Areas Target, and the Summer Peak
Demand Savings in Certain Geographic Areas Target on a prospective basis to reflect
updated projections of avoided resource costs, revised costing periods and revised line
loss factors. The following process was used to make the appropriate adjustments to
these Targets:
Recalculate the total for each of the above Targets using the new avoided cost
projections, costing periods and line loss factors as appropriate;
Determine the percentage of the above original Targets that Contractor has achieved by
the implementation date of the new avoided cost projections, costing periods and line loss
factors; and
Multiply the new Targets by that percentage to determine the amount of the new Targets
that the Contractor has already achieved as of the implementation date of the new
avoided costs, costing periods and line loss factors.
Electricity Savings, Demand Savings and TRB achieved after the revised targets are
adopted have been tracked using the updated avoided costs, costing periods and line loss
factors.
III. Additional Performance Awards for Achievement Above 100% Target Level
The Contractor may earn additional Performance Awards if the Contractor exceeds the
100% Target Level for any of the following indicators which are defined in Paragraph II:






Cumulative Annual Electricity Savings
Total Resource Benefits
Summer Peak Demand Savings
Winter Peak Demand Savings
Summer Peak Demand Savings in Geographic Areas
Winter Peak Demand Savings in Geographic Areas
There is no limit on the dollar amount of additional Performance Awards the Contractor may
earn for exceeding the 100% Target Level for any single performance indicator, other than
the overall total performance award cap of $2,347,000.
The additional Performance Awards for these indicators shall be calculated as follows:
C - 11
Vermont-VEIC 2006-2008 Contract for EEU

$15.373 for each Verified MWh above 262,031 MWh (100% Target Level) of
Verified Electricity Savings;

$0.015 for each Verified TRB$ above $225,392,772 (100% Target Level) of
Verified TRB;

$20.518 for each Verified Summer Peak kW above 37,702 kW (100% Target
Level) of Verified Summer Peak Demand Savings;

$13.317 for each Verified Winter Peak kW above 41,492 kW (100% Target Level)
of Verified Winter Peak Demand Savings;

$21.684 for each Verified Summer Peak kW in Geographic Area above 7,200
kW (100% Target Level) of Verified Summer Peak kW in Geographic Area; and

$20.185 for each Verified Winter Peak kW in Geographic Area above 7,740 kW
(100% Target Level) of Verified Winter Peak kW in Geographic Area.
Scaling above the 100% Target Level for these six performance indicators is summarized in
Table C-3.
IV. Minimum Performance Requirements
The Contractor’s eligibility to earn full or partial Performance Awards is contingent on
achievement of five Minimum Performance Requirement (MPR) standards. These standards,
and associated impacts on Performance Awards, are set forth in Table C-4.
A. Five Minimum Performance Requirement Standards
1. Minimum electric benefits. This requirement is intended to ensure that the
Contractor produces a minimum benefit-cost ratio of electricity resource savings
relative to the costs incurred to implement and evaluate the EEU and the EEC.
Electric benefits are defined as the present value (in year-2006 dollars) of lifetime net
electricity savings, valued at current projections of avoided resource costs. Total
electric benefits shall not include any electric benefits from the Customer Credit
program or from BED’s self-implementation of EEU services within BED’s service
territory. Total costs for the purposes of this minimum performance requirement
standard are defined as the sum of:
a. all expenses paid out by the Fiscal Agent from February 2006 through
January 2009, except for those related to:
i. the Customer Credit program,
ii. BED’s self-implementation of EEU services within BED’s
service territory (including the DPS’s monitoring and
evaluation of BED’s EEU activities),
iii. any performance incentive paid to the Contractor in 2006
resulting from the Contractor’s 2003-2005 activity, and
iv. participation in regional capacity market activities; and
C - 12
Vermont-VEIC 2006-2008 Contract for EEU
b. the amount collected to pay for possible Contractor earned
performance incentives resulting from the Contractor’s 2006-2008
activity.
Failure to meet this minimum standard of performance would disqualify the
Contractor from receiving any Performance Award.
2. Minimum spending on residential customers. This requirement is designed to
ensure that the Contractor devotes a minimum level of resources to serving
residential customers. Failure to attain this minimum standard of performance would
automatically reduce the amount the Contractor could earn if it reached the 100%
Target Level for all performance indicators ($1,995,000) by 18% (or $359,100).
3. Minimum low-income spending. This requirement is designed to ensure that the
Contractor devotes a minimum level of resources to serving Vermont’s low-income
population. Low income spending is defined as the total cost to provide EEU
services to Vermont ratepayers whose household income is at or below 80% of the
Vermont state median household income. Failure to attain this minimum standard of
performance would automatically reduce the amount the Contractor could earn if it
reached the 100% Target Level for all performance indicators ($1,995,000) by 18%
(or $359,100).
4. Minimum participation by small non-residential customers. This requirement
ensures that the Contractor serves a minimum acceptable percentage of small nonresidential customers out of all non-residential participants. For this purpose, small
non-residential customers are defined as electric accounts with annual energy
consumption of 40,000 kWh or below. Failure to attain this minimum standard of
performance would automatically reduce the amount the Contractor could earn if it
reached the 100% Target Level for all performance indicators ($1,995,000) by 18%
(or $359,100).
5. Geographic equity. This requirement is designed to ensure that the Contractor
provides a minimum acceptable level of benefits to each of Vermont’s counties.
Failure to meet this minimum standard of performance would automatically reduce
the amount the Contractor could earn if it reached the 100% Target Level for all
performance indicators ($1,995,000) by 6% (or $119,700).
The reductions in the maximum Performance Award at the 100% Target Level described
above are cumulative. That is, if the Contractor fails to meet both minimum performance
standards two and three, the maximum Performance Award at the 100% Target Level will
be reduced by $718,200. If the Contractor achieves the 100% Target Level on all
performance incentives described in Paragraph II, and fails to meet one or more
minimum performance standards, it will not be able to earn a Performance Award that
exceeds the reduced maximum Performance Award at the 100% Target Level. If the
Contractor exceeds the 100% Target Level for the performance indicators identified in
Paragraph III, it still may earn performance incentives above the reduced maximum
Performance Award at the 100% Target Level. Notwithstanding the previous sentence, if
C - 13
Vermont-VEIC 2006-2008 Contract for EEU
the Contractor does not meet one or more minimum performance standards, irrespective
of how much the Contractor exceeds the 100% Target Level for one or more
performance indicators, the maximum Performance Award that the Contractor may earn
is $2,347,000 less the required reductions described above.
B. Calculating Performance Awards
In determining the Contractor’s eligibility for a Performance Award, the first step will be
to assess whether the Contractor met the five minimum performance standards. If the
Contractor fails to meet a minimum performance standard and the maximum
Performance Award at the 100% Target Level is reduced accordingly, the Contractor will
only be eligible to receive the reduced Performance Award, even if the sum of the
amounts the Contractor would otherwise have been eligible to receive for meeting the
100% Target Level exceeds this reduced amount. For example, if the Contractor fails to
meet minimum performance standard two, but meets the 100% Target Level for all eight
performance indicators described in Paragraph II, the Contractor would only receive a
Performance Award of $1,635,900 even though the Contractor would have been eligible
for a Performance Award of $1,995,000 if it had met all the minimum performance
standards.
A more complicated example would be if the Contractor fails to meet minimum
performance standard two, and fails to meet the minimum threshold for performance
indicator eight, but achieves 102% of performance indicator one, and meets the 100%
Target Level for the remaining six performance indicators. In this situation the
Contractor’s Performance Award would be calculated as follows
 Step 1: Reduce the 100% Target Level Performance Award cap by $359,100 to
$1,635,900 because the Contractor failed to meet minimum performance standard
two;
 Step 2: Sum the amounts the Contractor would have been eligible to earn at the
100% Target Level if it had met all minimum performance standards, excluding the
extra amount the Contractor is eligible to earn for achieving 102% of performance
indicator one ($598,500 + $478,800 + $139,650 + $99,750 + $199,500 + 199,500 +
$139,650+ $0 = $1,855,350);
 Step 3: Compare the results of steps one and two. The Contractor is eligible to
earn a Performance Award equal to the lesser of the two amounts for its 100%
Target Level performance, in this example, $1,635,900;
 Step 4: Calculate the amounts the Contractor is eligible to earn above the 100%
Target Level (in this case $66,307 for achieving 2% above the 100% Target Level
for performance indicator one);4 and
 Step 5: Add the results of steps three and four. The Contractor earns a
Performance Award equal to the sum of these amounts, in this example,
$1,921,657.
4
In no case would the Contractor be eligible to earn more than the total available performance award amount of
$2,347,000 less the amount of the failed minimum standard, in this case $2,347,000 less $359,100 or $1,987,900 for
its achievements above the 100% Target Level.
C - 14
Vermont-VEIC 2006-2008 Contract for EEU
V.
Documentation and Verification
A. Cumulative Annual Electricity Savings, Total Resource Benefits, Summer Peak
Demand Savings, Winter Peak Demand Savings, Summer Peak Demand Savings in
Geographic Areas, and Winter Peak Demand Savings in Geographic Areas
In order to establish and validate achievements for the Performance Awards for these six
indicators, the Contractor and the Board agree to the following documentation and
verification process.
1. Verification Process
By April 2, 2007 the Contractor will submit a report to the Board, Contract
Administrator and DPS that establishes its claim for Annual Electricity Savings, Total
Resource Benefits, Summer Peak Demand Savings, and Winter Peak Demand
Savings for 2006.
By April 1, 2008, and April 1, 2009, the Contractor will submit a report to the Board,
Contract Administrator and DPS that establishes its claim for Annual Electricity
Savings, Total Resource Benefits, Summer Peak Demand Savings, Winter Peak
Demand Savings, Summer Peak Demand Savings in Geographic Areas, and Winter
Peak Demand Savings in Geographic Areas for the previous year.
The Contract Administrator and the DPS will review the Contractor’s report and, at
their own discretion, review the Contractor’s project files in order to assess savings
estimates for custom measures, comprehensive projects, or key input assumptions.
The Contract Administrator and the DPS will then meet with the Contractor in an
attempt to resolve any differences on claimed savings.
By June 1, 2007, the DPS will provide a technical report or memorandum to the
Contract Administrator with its recommendation on Annual Electricity Savings, Total
Resource Benefits, Summer Peak Demand Savings, and Winter Peak Demand
Savings for 2006. Following receipt of the DPS’s report, the Contract Administrator
will provide a recommendation to the Board regarding Annual Electricity Savings,
Total Resource Benefits, Summer Peak Demand Savings, and Winter Peak Demand
Savings for 2006.
By June 1, 2008, and June 1, 2009, the DPS will provide a technical report or
memorandum to the Contract Administrator with its recommendation on Annual
Electricity Savings, Total Resource Benefits, Summer Peak Demand Savings and
Winter Peak Demand Savings, Summer Peak Demand Savings in Geographic Areas,
and Winter Peak Demand Savings in Geographic Areas for the previous year.
Following receipt of the DPS’s report, the Contract Administrator will provide a
recommendation to the Board regarding Annual Electricity Savings, Total Resource
Benefits, Summer Peak Demand Savings, and Winter Peak Demand Savings,
Summer Peak Demand Savings in Geographic Areas, and Winter Peak Demand
Savings in Geographic Areas for the preceding year.
C - 15
Vermont-VEIC 2006-2008 Contract for EEU
Following receipt of the DPS’s report in 2009, the Contract Administrator will also
provide a recommendation to the Board on the appropriate Performance Award for
each category. Each year the Board will make a final determination regarding
Annual Electricity Savings, Total Resource Benefits, Summer Peak Demand Savings,
and Winter Peak Demand Savings from the previous year. In 2008 and 2009, the
Board will also make a final determination regarding Summer Peak Demand Savings
in Geographic Areas and Winter Peak Demand Savings in Geographic Areas from the
previous year. By July 1, 2009, the Board will make a final determination regarding
cumulative Annual Electricity Savings, Total Resource Benefits, Summer Peak
Demand Savings, Winter Peak Demand Savings, Summer Peak Demand Savings in
Geographic Areas, and Winter Peak Demand Savings in Geographic Areas and the
appropriate Performance Award for each category.
However, if the Contractor is not chosen as the entity to continue to operate the EEU
after December 31, 2008 then the annual savings verification process for Year 2008
shall be in accordance with the following schedule:
 The Contractor’s 2008 savings claim shall be submitted by March 1, 2009.
 The Board, the Contract Administrator, and the DPS shall complete the
savings verification process by March 31, 2009.
 The Board will make a final determination regarding Cumulative Annual
Electricity Savings, Total Resource Benefits, Summer Peak Demand
Savings, Winter Peak Demand Savings, Summer Peak Demand Savings in
Geographic Areas, and Winter Peak Demand Savings in Geographic Areas
and the appropriate Performance Award for each category by May 1, 2009.
2. Establishment and Documentation of Savings Estimates
The Contractor shall work with the Contract Administrator and the DPS to establish
and maintain reasonable savings estimates for prescriptive energy efficiency
measures offered. The Contractor shall maintain its documentation of all prescriptive
measure savings assumptions in the Technical Reference Manual (TRM). For custom
measures or projects, where prescriptive measure savings assumptions have not been
established or do not apply, the Contractor shall maintain in its files documentation
of all assumptions and calculations used to establish its claim for Electricity Savings,
Total Resource Benefits, Summer Peak Demand Savings, Winter Peak Demand
Savings, Summer Peak Demand Savings in Geographic Areas, and Winter Peak
Demand Savings in Geographic Areas. All information on savings assumptions and
calculations used shall be available for review by the DPS and Contract
Administrator.
3. Updating of Estimates
As part of its ongoing management and planning, the Contractor shall review and
update, as appropriate, its estimates of Electricity Savings, Total Resource Benefits,
Summer Peak Demand Savings, and Winter Peak Demand Savings for measures,
technologies and projects in order to reflect information obtained from measurement
and evaluation studies, experiences gained from implementation of energy efficiency
services and initiatives, and changes in building and appliance standards and codes.
The Contractor shall use these revised estimates of Annual Electricity Savings, Total
C - 16
Vermont-VEIC 2006-2008 Contract for EEU
Resource Benefits, Summer Peak Demand Savings, and Winter Peak Demand
Savings on a prospective basis for measures installed in reporting claims of Annual
Electricity Savings, Total Resource Benefits, Summer Peak Demand Savings, Winter
Peak Demand Savings, Summer Peak Demand Savings in Geographic Areas, and
Winter Peak Demand Savings in Geographic Areas in future years.
B. Stocking of Compact Fluorescent Lightbulbs by Grocery Stores
In order to establish and validate achievements for this Performance Award, the
Contractor will provide the Contract Administrator with:


signed copies of the grocery store location participation agreements that meet
the criteria detailed in Paragraph II.G, above; and
verifiable sales data that demonstrates that each of the grocery store locations
that had a verified participation agreement also sold CFLs between August 1,
2008 and December 31, 2008.
C. Community Awareness
In order to establish and validate achievements for this Performance Award, the
Contractor agrees to the following documentation and verification process.
1. Period of Performance
For each designated community the period of performance begins on May 5, 2006
and ends on December 31, 2008. All participation and energy savings results are
cumulative for this period.
2. Definition of Community
The boundary of each designated community is defined by the appropriate zip code
for the community.
3. Percentage of Community Participation
The percentage of community participation is defined by the number of unique
electric accounts with efficiency measures implemented within the period of
performance divided by the total number of electric accounts in the designated
community as of the start date for that community.
In the case of a manufacturer and/or retail buy-down incentive (see Program
Implementation Procedure adopted June 2003), the number of electric accounts with
installed efficiency measures is determined as follows:
Step 1: Ascertain the average number of products per electric account by dividing
the total number of products sold statewide via EEU rebate coupons for the years
2003 and 2004 by the number of unique electric accounts that purchased those
products. A specific average will be calculated for each product type (i.e. CFL,
fixture, appliance). Electric accounts with an abnormally high number of
products purchased will be excluded from both the numerator and the
denominator of this calculation.
C - 17
Vermont-VEIC 2006-2008 Contract for EEU
Step 2: Manufacturer or retailer reports the quantity of products sold from a store
location.
Step 3: Products are allocated to zip code(s) based on store sales data as
described in the June 2003 Program Implementation Procedure.
Step 4: The number of electric accounts with installed efficiency measures for the
designated community is determined by dividing the total quantity of products in
each zip code within the designated community by the statewide products per
electric account average.
4. Percent Energy Use Reduction
For the purpose of estimating energy use reduction in the designated communities,
community-wide energy savings (MWh) shall be taken from Contractor’s tracking
system consistent with agreed-upon EEU savings estimation, savings claim and
verification procedures.
The base year energy use for the designated community is defined as the annual 2005
total electric energy sales for all electric accounts, in all rate classes, within the
designated community, as determined from the Contractor’s database of customer
usage information.
The level of savings achieved in a designated community will be the sum of all
verified cumulative savings reported for measures installed within the designated
community over the period of performance as defined above and as recorded in the
Contractor’s tracking system.
5. Verification Process
The Contractor shall provide a report to the Contract Administrator that provides the
claim and supporting information for this performance award by April 1, 2009. The
Contract Administrator will review the Contractor’s report and, at its own
discretion, review the Contractor’s supporting information for its claim. The
Contract Administrator will then meet with the Contractor in an attempt to resolve
any differences on claims regarding whether the Contractor met this performance
indicator. Following this meeting, the Contract Administrator will provide a
recommendation to the Board regarding whether the Contractor met this
performance indicator and the amount to be awarded. By July 1, 2009, the Board
will make a final determination regarding whether the Contractor met this
performance indicator and the amount to be awarded.
However, if the Contractor is not chosen as the entity to continue to operate the EEU
after December 31, 2008 then the above process will be completed such that the
Board can make a final determination regarding this performance indicator by May
1, 2009.
C - 18
Vermont-VEIC 2006-2008 Contract for EEU
D. Minimum Performance Requirements
In order to establish and validate achievements for the Minimum Performance
Requirements, the Contractor agrees to the following documentation and verification
process.
1. Verification Process
By April 1, 2009, the Contractor shall submit a report to the Contract Administrator
that establishes its claims regarding whether it met the five minimum performance
requirements that are defined in Paragraph IV. The Contract Administrator will
review the Contractor’s report and, at its own discretion, review the Contractor’s
supporting information for its claims. The Contract Administrator will then meet
with the Contractor in an attempt to resolve any differences on claims regarding
whether the Contractor met the five minimum performance requirements.
Following this meeting, the Contract Administrator will provide a recommendation
to the Board regarding whether the Contractor met each of the minimum
performance requirements. By July 1, 2009, the Board will make a final
determination regarding whether the Contractor met each of the minimum
performance requirements, and whether any adjustments to the Contractor’s
Performance Awards are required.
However, if the Contractor is not chosen as the entity to continue to operate the EEU
after December 31, 2008 then the above process will be completed such that the
Board can make a final determination regarding whether the Contractor met each of
the minimum performance requirements, and whether any adjustments to the
Contractor’s Performance Awards are required, by May 1, 2009.
C - 19