95- 648 C.M.R. ch. 380, § 4

Current through 2024-51, December 18, 2024

Section 648-380-4 - COST EFFECTIVENESS TESTS

The following tests will be used to determine whether a program is cost effective.

A.Modified Societal Test. Programs that are reasonably likely to satisfy the Modified Societal Test are cost effective. The Modified Societal Test is satisfied when the program benefits exceed the program costs. Costs and benefits shall be considered in the Modified Societal Test regardless of whether they are paid or experienced by the participant, the Conservation Program Fund, or any other individual, business, or government agency.

1.Program benefits. Program benefits will include the following:

a Avoided electric generation costs including energy and capacity costs, using estimates of market prices and adjusting for line losses. These estimates may be differentiated by time periods that influence market prices, including but not limited to peak and off-peak periods and summer and winter periods;

b Avoided transmission and distribution costs, using estimates of transmission and distribution utility marginal transmission and distribution costs. These estimates may be differentiated by time periods that influence costs;

c Avoided fossil fuel costs, using estimated savings in oil, gas or other fossil fuel use, at estimated fossil fuel prices;

d Other resource benefits, such as reduced water and sewer costs;

e Non-resource benefits, including customer benefits such as reduced operation and maintenance costs, deferred replacement costs, productivity improvements, economic development benefits and environmental benefits, to the extent such benefits can be reasonably quantified and valued.

2.Program costs. Program costs will include the following:

a Direct program costs, including program design, administration, implementation, marketing, evaluation and other reasonably identifiable costs directly associated with the program.

b Measure costs. For new construction or replacement programs, measure costs are the incremental costs of the energy efficiency measure, including installation, over an equivalent baseline measure. For retrofit programs, measure costs are the full cost of the energy efficiency measure, including installation, less any salvage for the replaced measure.

c Ongoing customer costs, including costs such as increased operation and maintenance costs, reduced productivity, and lost economic development opportunities, to the extent such costs can be reasonably quantified and valued.

3.Discount rate assumption. The discount rate used for present value calculations shall be the current yield of long-term (10 years or longer) U.S. Treasury securities, adjusted for inflation. The Commission may consider an alternative discount rate when characteristics of a program are inconsistent with use of long-term U.S. Treasury securities.

4.Net present value. Cost effectiveness of an energy efficiency measure will be calculated based on the net present value of the costs and benefits over the expected life of the measure.

5.Post-program effects. For those programs that are expected to influence the development of self-sustaining markets, program cost effectiveness will be calculated for a reasonable additional period after the program is terminated in order to capture post-program market effects.

6.Incentive Level Limitation. When developing a program that satisfies the Modified Societal Test, the Commission shall, when setting incentive levels, consider the value of the program savings associated with electrical production and delivery.

B.Non-Quantifiable Cost Effectiveness Test. The Commission may implement a program without satisfying the Modified Societal Test if:

1. Program benefits are known to exist but cannot be quantified with sufficient accuracy to conclude that the program benefits exceed the program costs;

2. The program satisfies some other statutory criterion or a goal or objective established by the Commission in implementing the Conservation Act; and

3. The entire portfolio of conservation programs produces quantifiable benefits that substantially exceed total portfolio program costs.

95- 648 C.M.R. ch. 380, § 4