Vermont-VEIC Contract for EEU
ATTACHMENT N
PERFORMANCE INCENTIVE MECHANISM:
January 1, 2009 to December 31, 2011
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, 2009 through December 31, 2011, the Contractor can earn up to
$2,180,000 in Electric PI Awards for meeting the 100% Target Level for performance
indicators supported by Contractor Electric EEU Funds. Table N-1 shows the Contractor
Electric EEU Funds performance indicators and the dollar amount allocated to each
indicator, if the Contractor achieves each indicator’s 100% Target Level.
For the same period, the Contractor can earn additional Electric PI Awards if the Contractor
exceeds the 100% Target Level for each of the Contractor Electric EEU Funds performance
indicators as identified in Tables N-1 and N-3. The maximum amount of Electric PI Awards
that the Contractor can earn for performance indicators supported by Contractor Electric
EEU Funds for the period January 1, 2009 through December 31, 2011, is $2,532,000.
The Contractor can also earn an Unregulated Fuel PI Award of up to $100,000 for a
performance indicator supported by Contractor Unregulated Fuel Funds. The actual
performance indicator for Contractor Unregulated Fuel Funds is to be decided as stated in
Paragraph II.H, below.
The maximum amount of Performance Awards that the Contractor can earn for all
performance indicators for the period January 1, 2009 through December 31, 2011, is
$2,632,000.
The schedule and processes for documenting and verifying achievement of performance
indicators is outlined in Paragraph VI 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, 2009 through
December 31, 2011 (up to a maximum of $2,632,000) shall be made by July 1, 2012.
The performance incentive mechanism is subject to a set of five minimum performance
requirements, which are summarized in Tables N-4 and N-5. The final amount of
Performance Awards granted to Contractor will be subject to achievement of these minimum
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performance requirements and will be adjusted in accordance with Paragraph IV should the
Contractor fail to meet any of the minimum performance requirements.
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 Electric PI Award or the Unregulated
Fuel PI 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 supported by Contractor Electric EEU Funds
are summarized in Table N-2.
A. Cumulative Annual Electricity Savings
1. Weighting
The overall weight for this performance indicator is 33% of the Contractor’s total
maximum Electric PI Award at the 100% Target Level ($2,180,000 * 0.33 =
$719,400).
2. 100% Target Level
For the period January 1, 2009 through December 31, 2011, the 100% Target Level
for this indicator (also known as the Electricity Savings Target) is 360,000 MWh (at
generation and net of free riders).1 The Electricity Savings Target measures the sum
of annualized first-year savings achieved by implementation of all EEU strategies and
initiatives that are funded by Contractor Electric EEU Funds, except for the
Customer Credit initiative, during the period 1/1/2009 through 12/31/2011.
During the contract period the Electricity Savings Target will be adjusted to reflect
changes in Contractor Electric EEU Funds that might occur, consistent with the
limitation set forth in Paragraph 5 of the Main Body. Specifically, the Electricity
Savings Target will be increased (or decreased) by 3.81 MWh per $1,000 of increase
(or decrease) in Contractor Electric 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 288,000 MWh.
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.T of Attachment L 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.T of Attachment L, shall be
counted toward the Contractor’s performance for the purposes of determining Performance Awards.
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Vermont-VEIC Contract for EEU
If the Contractor achieves 80% of its Electricity Savings Target, it can earn $359,700
(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.
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 288,000 MWh.

$359,700 for achieving 288,000 MWh (80% of the 100% Target Level) plus
$4.996 per MWh for verified cumulative annual Electricity Savings between
288,000 MWh and 360,000 MWh.
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 25% of the Contractor’s total
maximum Electric PI Award at the 100% Target Level ($2,180,000 *0.25 =
$545,000).
2. 100% Target Level
For the period 1/1/2009 through 12/31/2011, the 100% Target Level for this indicator
(also known as the Total Resource Benefits (“TRB”) Target) is $342,386,000 (in
year-2006 dollars). The TRB Target measures the cumulative TRB achieved by
implementation of all EEU services and initiatives that are funded by the Contractor
Electric EEU Funds except the Customer Credit initiative. The TRB for any given
service is defined as the present value (in year-2006 dollars) of lifetime net resource
savings in electricity, fossil fuel, and water, which are valued at current projections of
avoided resource costs.2 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 Electric EEU Funds that might occur, consistent with the limitation set
forth in Paragraph 5 of the Main Body. Specifically, the TRB Target will be
increased (or decreased) by $3,634 (in 2006 dollars) per $1,000 of increase (or
decrease) in Contractor Electric EEU Funds.
2
TRB does not include measure costs, or any other costs or benefits to customers (e.g., productivity
increases, changes in O&M costs).
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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 75% of the TRB
Target or $256,789,500.
If the Contractor achieves 75% of its TRB Target, it can earn $272,500 (50% of the
amount it would earn if it achieved 100% of its TRB Target). The Performance
Award shall be scaled linearly between 75% 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 $256,789,500.

$272,500 for achieving TRB of $256,789,500 (75% of the 100% Target Level)
plus $.003184 per TRB Dollar for verified TRB between $256,789,500 and
$342,386,000.
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 12% of the Contractor’s total
maximum Electric PI Award at the 100% Target Level ($2,180,000 *0.12 =
$261,600).
2. 100% Target Level
For the period 1/1/2009 through 12/31/2011, the 100% Target Level for this indicator
(also known as the Summer Peak Demand Savings Target) is 51,200 kW. The
Summer Peak Demand Savings Target measures the cumulative annual summer peak
demand savings achieved by implementation of all EEU services and initiatives that
are funded by the Contractor Electric EEU Funds 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 Electric EEU Funds that might occur, consistent with
the limitation set forth in Paragraph 5 of the Main Body. Specifically, the Summer
Peak Demand Savings Target will be increased (or decreased) by0.54 kW per $1,000
of increase (or decrease) in Contractor Electric EEU Funds.
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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 75% of the Summer Peak Demand Savings Target or 38,400 kW.
If the Contractor achieves 75% of its Summer Peak Demand Savings Target, it can
earn $130,800 (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 75% 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 38,400 kW.

$130,800 for achieving Summer Peak Demand Savings of 38,400 kW (75% of the
100% Target Level) plus $10.219 per kW for verified cumulative annual Summer
Peak Demand Savings between 38,400 kW and 51,200 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 Electric PI Award at the 100% Target Level ($2,180,000 *0.05 =
$109,000).
2. 100% Target Level
For the period 1/1/2009 through 12/31/2011, the 100% Target Level for this indicator
(also known as the Winter Peak Demand Savings Target) is 54,000 kW. The Winter
Peak Demand Savings Target measures the cumulative annual winter peak demand
savings achieved by implementation of all EEU services and initiatives that are
funded by the Contractor Electric EEU Funds 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 Electric EEU Funds that might occur, consistent with
the limitation set forth in Paragraph 5 of the Main Body. Specifically, the Winter
Peak Demand Savings Target will be increased (or decreased) by0.57 kW per $1,000
of increase (or decrease) in Contractor Electric EEU Funds.
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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 40,500 kW.
If the Contractor achieves 75% of its Winter Peak Demand Savings Target, it can
earn $54,500 (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 40,500 kW.

$54,500 for achieving Winter Peak Demand Savings of 40,500 kW (50% of the
100% Target Level) plus $4.037 per kW for verified cumulative annual Winter
Peak Demand Savings between 40,500 kW and 54,000 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, Rutland and
St. Albans City/Town as generally described by the Board in the Geographic Targeting
Order 2009-2011.
1. Weighting
The overall weight for this performance indicator is 13% of the Contractor’s total
maximum Electric PI Award at the 100% Target Level ($2,180,000 *0.13 =
$283,400).
2. 100% Target Level
For the period 1/1/2009 through 12/31/2011, the 100% Target Level for this indicator
is 8,100 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 that are funded by the Contractor Electric EEU Funds within the abovereferenced 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 Electric EEU Funds
that might occur, consistent with the limitation set forth in Paragraph 5 of the Main
Body. Specifically, the Summer Peak Demand Savings in Certain Geographic Areas
Target will be increased (or decreased) by0.09 kW per $1,000 of increase (or
decrease) in Contractor Electric EEU Funds.
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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
specified threshold. The threshold is set at 75% of the Summer Peak Demand
Savings in Certain Geographic Areas Target or 6,075 kW.
If the Contractor achieves 75% of its Summer Peak Demand Savings in Certain
Geographic Areas Target, it can earn $141,700 (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 75% 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 6,075 kW.

$141,700 for achieving Summer Peak Demand Savings in Certain Geographic
Areas of 6,075 kW (75% of the 100% Target Level) plus $69.975 per kW for
verified Summer Peak Demand Savings in Certain Geographic Areas between
6,075 kW and 8,100 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 as generally described by the
Board in the Geographic Targeting Order 2009-2011.
1. Weighting
The overall weight for this performance indicator is 7% of the Contractor’s total
maximum Electric PI Award at the 100% Target Level ($2,180,000 *0.07 =
$152,600).
2. 100% Target Level
For the period 1/1/2009 through 12/31/2011, the 100% Target Level for this indicator
is 2,400 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
that are funded by the Contractor Electric EEU Funds within the above referencedgeographic 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 Electric EEU Funds
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that might occur, consistent with the limitation set forth in Paragraph 5 of the Main
Body. Specifically, the Winter Peak Demand Savings in Certain Geographic Areas
Target will be increased (or decreased) by0.03 kW per $1,000 of increase (or
decrease) in Contractor Electric 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 in Certain Geographic Areas above a
specified threshold. The threshold is set at 75% of the Winter Peak Demand Savings
in Certain Geographic Areas Target or 1,800 kW.
If the Contractor achieves 75% of its Winter Peak Demand Savings in Certain
Geographic Areas Target, it can earn $76,300 (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 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 1,800 kW.

$76,300 for achieving Winter Peak Demand Savings in Certain Geographic Areas
of 1,800 kW (75% of the 100% Target Level) plus $127.167 per kW for verified
Winter Peak Demand Savings in Certain Geographic Areas between 1,800 kW
and 2,400 kW.
G. Business End Uses
This performance incentive is designed to encourage the Contractor to achieve
increased levels of non-lighting, non-fuel-switching and non-snowmaking measures in
the Business Existing Facilities and Business New Construction markets.
1. Weighting
The overall weight for this performance indicator is 5% of the Contractor’s total
maximum Electric PI Award at the 100% Target Level ($2,180,000 *0.05 =
$109,000).
2. 100% Target Level
For the period January 1, 2009 through December 31, 2011, the 100% Target Level
for this indicator (also known as the Business End Uses Target) is 3,500 MWh in the
Business Existing Facilities and Business New Construction markets for all end uses
except:


Lighting;
non-fuel-switching; and
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Vermont-VEIC Contract for EEU

snow making.
During the contract period the Electricity Savings Target will be adjusted to reflect
changes in Contractor Electric EEU Funds that might occur, consistent with the
limitation set forth in Paragraph 5 of the Main Body. Specifically, the Business End
Uses Target will be increased (or decreased) by0.04 MWh per $1,000 of increase (or
decrease) in Contractor Electric 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 Business End Uses Savings above a specified threshold. The threshold is
set at 75% of the Electricity Savings Target or 2,625 MWh.
If the Contractor achieves 75% of its Business End Uses Target, it can earn $54,500
(50% of the amount it would earn if it achieved 100% of its Electricity Savings
Target). The Performance Award shall be scaled linearly between 75% and 100% of
the actual Business End Uses savings as detailed in Paragraph II.G.4.
4.
Performance Award Up to 100% Target Level
The Contractor’s Performance Award shall be:

$0 if verified cumulative annual Business End Uses are less than 2,625 MWh.

$54,500 for achieving 2,625 MWh (75% of the 100% Target Level) plus $62.286
per MWh for verified cumulative Business End Uses savings between 2,625
MWh and 3,500 MWh.
H. Performance Indicator for Unregulated Fuels Activities Funded by Contractor
Unregulated Fuel Funds
The Contractor will work with the DPS and the Contract Administrator to define an
appropriate indicator by 4/30/2009 to reward the Contractor for superior performance in
its Unregulated Fuel Funds activities (as detailed in Attachment L, Scope of Work,
Section II.B). This includes coming to agreement on the 100% Target Level; minimum
and maximum thresholds and associated scaling (if appropriate); ability of Contractor to
earn performance award for exceeding the 100% Target Level; and agreed-upon
approaches for documenting and verifying achievement of this indicator.
It is agreed that the dollar amount available for this performance award is $100,000 of
the Contractor Unregulated Fuel Funds.
I. Revised Avoided Cost Projections
The Board may approve updated Avoided Cost Projections during the period of
1/1/2009 to 12/31/2011. The Contractor will be provided a mutually agreed-upon time
frame to implement the use of these new avoided costs. The Board and the Contractor
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shall execute a contract amendment to modify the TRB Target on a prospective basis to
reflect updated projections of avoided resource costs. Unless mutually agreed otherwise
by the Contractor and the Board, the following process will be used to make the
appropriate adjustments to the TRB Target:



Recalculate the total for the TRB Target using the new avoided cost
projections;
Determine the percentage of the above original TRB Target that Contractor
has achieved by the implementation date of the new avoided cost projections;
and
Multiply the new TRB Target 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.
TRB achieved after the revised targets are adopted will be tracked using the updated
avoided costs.
Any additional issues associated with new avoided costs (including but not limited to any
mid-year implementation issues) will be agreed upon in advance by the Contractor and
the Contract Administrator in consultation with the DPS.
III. Additional Performance Awards for Achievement Above 100% Target Level
The Contractor may earn additional Electric PI 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
Business End Uses
There is no limit on the dollar amount of additional Electric PI 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 $2,532,000.
The additional Electric PI Awards for these indicators shall be calculated as follows:

$8.0667 for each Verified MWh above 360,000 MWh (100% Target Level) of
Verified Electricity Savings;

$.0064 for each Verified TRB$ above $342,386,000 (100% Target Level) of Verified
TRB;
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
$20.6250 for each Verified Summer Peak kW above 51,200 kW (100% Target Level)
of Verified Summer Peak Demand Savings;

$8.1481 for each Verified Winter Peak kW above 54,000 kW (100% Target Level) of
Verified Winter Peak Demand Savings;

$141.2346 for each Verified Summer Peak kW in Geographic Area above 8,100 kW
(100% Target Level) of Verified Summer Peak kW in Geographic Area;

$256.6667 for each Verified Winter Peak kW in Geographic Area above 2,400 kW
(100% Target Level) of Verified Winter Peak kW in Geographic Area; and

$125.7143 for each Verified MWh above 3,500 MWh (100% Target Level) of
Verified Business End Uses Savings.
Scaling above the 100% Target Level for these seven performance indicators is summarized
in Table N-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 N-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 2009 through
January 2012, 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 2009
resulting from the Contractor’s 2006-2008 activity,
iv. participation in regional capacity market activities; and
v. Contractor Unregulated Fuel Funds.
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b. the amount collected to pay for possible Contractor earned
performance incentives resulting from the Contractor’s 2009-2011
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 Contractor Electric EEU
Funds 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 supported by
Contractor Electric EEU Funds ($2,180,000) by 18% (or $392,400).
3. Minimum low-income spending. This requirement is designed to ensure that the
Contractor devotes a minimum level of Contractor Electric EEU Funds 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 supported by Contractor Electric EEU Funds ($2,180,000) by 18% (or
$392,400).
4. Minimum participation by small non-residential customers. This requirement
ensures that the Contractor serves with Contractor Electric EEU Funds a minimum
acceptable percentage of small non-residential customers out of all non-residential
participants. For this purpose, small non-residential customers are defined as nonresidential 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 supported by Contractor Electric EEU Funds ($2,180,000)
by 18% (or $392,400).
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
through its activities supported by Contractor Electric EEU Funds. It is agreed that
Essex and Orleans Counties will be treated as one geographic region for the purposes
of this minimum performance requirement.3 Failure to meet this minimum standard
3
It is necessary to combine Essex and Orleans counties in order to mitigate the unintended consequence of Essex
County’s customer base. Essex County has one customer that is so large, relative to all other customers in Essex
County combined, that it would be virtually impossible for the Contractor to meet the minimum performance
standard for Essex County if the large customer did not complete a significant project. The geographic equity
minimum performance standard is intended to encourage the Contractor to focus its efforts throughout the state, not
to target one particular customer. Combining Essex and Orleans counties for the purpose of the minimum
performance standard will encourage the Contractor to focus its efforts throughout both counties, rather than solely
on Essex County’s one large customer.
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of performance would automatically reduce the amount the Contractor could earn if it
reached the 100% Target Level for all performance indicators supported by
Contractor Electric EEU Funds ($2,180,000) by 6% (or $130,800).
The reductions in the maximum Electric PI Award at the 100% Target Level described
above are cumulative. For example, if the Contractor fails to meet both minimum
performance standards two and three, the maximum Electric PI Award at the 100%
Target Level will be reduced by $784,800. 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 an Electric PI Award
that exceeds the reduced maximum Electric PI 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
Electric PI Award at the 100% Target Level. Notwithstanding the previous sentence, if
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 Electric PI Award that the Contractor may earn is
$2,532,000 less the required reductions described above.
B. Calculating Performance Awards
In determining the Contractor’s eligibility for an Electric PI 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 Electric PI
Award at the 100% Target Level is reduced accordingly, the Contractor will only be
eligible to receive the reduced Electric PI 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 seven
performance indicators described in Paragraph II, the Contractor would only receive an
Electric PI Award of $1,787,600 even though the Contractor would have been eligible
for an Electric PI Award of $2,180,000 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 seven, but achieves 102% of performance indicator one, and meets the 100%
Target Level for the remaining five performance indicators. In this situation the
Contractor’s Electric PI Award would be calculated as follows
 Step 1: Reduce the 100% Target Level Electric PI Award cap by $392,400 to
$1,787,600 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 ($719,400 + $545,000 + $261,600 + $109,000 + $283,400 + $152,600
+ $0 = $2,071,000);
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Vermont-VEIC Contract for EEU



V.
Step 3: Compare the results of steps one and two. The Contractor is eligible to
earn an Electric PI Award equal to the lesser of the two amounts for its 100%
Target Level performance, in this example, $1,787,600;
Step 4: Calculate the amounts the Contractor is eligible to earn above the 100%
Target Level (in this case $58,080 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 an Electric PI
Award equal to the sum of these amounts, in this example, $1,845,680.
One-Time Adjustment to 100% Target Levels and Associated Factors for
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
Due to the rapidly changing market for Residential Standard CFLs and the fact that the DPS
evaluation activities related to Residential Standard CFLs are not expected to be completed
until after January 1, 2009 the Board and the Contractor agree to the following:



The 100% Target Level in Table N-1 and stated above for Cumulative Annual
Electricity Savings contain agreed assumptions about the net MWh savings per
Residential Standard CFL (Row 2 in Table N-6). These assumptions result in total
expected MWh savings to be achieved from Residential Standard CFLs for all three
years as shown in Row 3, Column 4.
The Contractor Administrator, the DPS and the Contractor will work cooperatively
to develop new TRM values (“measure characterizations”) for Residential Standard
CFLs. These measure characterizations will result in new overall net savings per
Residential Standard CFL. If the new net MWh savings per CFL is multiplied by the
total assumed Residential Standard CFL quantities (Row 1 in Table N-6) it will result
in a new total MWh savings for all three years. If this total MWh savings is 15%
higher or lower than the total three-year MWh savings contained in Table N-6, then
the 100% Target Levels for 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 will
be adjusted.
The adjustments for the 100% Target Level for Cumulative Annual Electricity
Savings will be arrived at as follows:
1. Multiply the new agreed-upon MWh savings per Residential Standard
CFL by the quantities in Row 1 of Table N-6 to arrive at a new three-year
MWh savings to be achieved from Residential Standard CFLs.
2. This difference between the total MWh savings calculated in step 1 and
the total MWh savings shown in Table N-6 (Row 3, Column 4) is added or
subtracted to the 100% Target Level for Cumulative Annual Electricity
4
In no case would the Contractor be eligible to earn more than the total available Electric PI Award amount of
$2,532,000 less the amount of the failed minimum standard, in this case $2,532,000 less $392,400 or $2,139,600 for
its achievements above the 100% Target Level.
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Vermont-VEIC Contract for EEU
Savings as stated in Table N-1 to arrive at a new 100% Target Level for
this performance indicator.
3. The new 100% Target Level for Cumulative Annual Electricity Savings
will be used to update the adjustment factor stated in Paragraph II.A.2 that
updates savings at the 100% Target Level as a result of any changes in
Contractor Electric EEU Funds.
4. The new 100% Target Level for Cumulative Annual Electricity Savings
will be used to update the “Threshold and Scaling Up to 100% Target
Level” amounts shown in Paragraph II.A.2 and II.A.3, above.
5. The new 100% Target Level for Cumulative Annual Electricity Savings
will be used to update the “Additional Performance Awards for
Achievement Above 100% Target Level” earnings rate as shown in
Paragraph III, above.
VI.

The 100% Target Level for 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 will be adjusted using the
same method outlined above for Cumulative Annual Electricity Savings. The only
difference will be that the quantities of Residential Standard CFLs for Winter and
Summer Peak Demand in Geographic Areas will be as stated in Tables N-7 and N-8.

The updated measure characterizations referenced above for Residential Standard
CFL will be agreed upon no later than March 31, 2009.

No further adjustments to the 100% Target Levels will be made due to any future
changes to Residential Standard CFL TRM measure characterizations.
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, Winter Peak Demand Savings in Geographic Areas, and
Business End Uses
In order to establish and validate achievements for the Performance Awards for these
seven indicators, the Contractor and the Board agree to the following documentation
and verification process.
1. Verification Process
By April 1 of 2010, 2011 and 2012 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, Winter Peak
Demand Savings in Geographic Areas, and Business End Uses 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.
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Vermont-VEIC Contract for EEU
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, 2010, 2011 and 2012, 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, Winter
Peak Demand Savings, Summer Peak Demand Savings in Geographic Areas, Winter
Peak Demand Savings in Geographic Areas, and Business End Uses 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, Winter Peak Demand Savings, Summer
Peak Demand Savings in Geographic Areas, Winter Peak Demand Savings in
Geographic Areas, and Business End Uses for the preceding year.
Following receipt of the DPS’s report in 2012, 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,
Winter Peak Demand Savings, Summer Peak Demand Savings in Geographic Areas,
Winter Peak Demand Savings in Geographic Areas, and Business End Uses from the
previous year. By July 1, 2012, 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, Winter Peak Demand Savings in Geographic Areas, and Business
End Uses 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, 2011 then the annual savings verification process for Year 2011
shall be in accordance with the following schedule:
 The Contractor’s 2011 savings claim shall be submitted by March 1, 2012.
 The Board, the Contract Administrator, and the DPS shall complete the
savings verification process by May 15, 2012.
 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, Winter Peak Demand Savings in Geographic Areas and
Business End Uses and the appropriate Performance Award for each category
by June 15, 2012.
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,
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Vermont-VEIC Contract for EEU
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 and Business End Uses. 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
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, Winter
Peak Demand Savings in Geographic Areas and Business End Uses in future years.
B. Performance Indicator for Unregulated Fuels Activities Funded by Contractor
Unregulated Fuel Funds
The Contractor will work with the DPS and the Contract Administrator to define an
agreed upon documentation and verification process and schedule for this performance
indicator.
C. 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, 2012, 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, 2012, 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.
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Vermont-VEIC Contract for EEU
However, if the Contractor is not chosen as the entity to continue to operate the EEU
after December 31, 2011 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 June 15, 2012.
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