95- 648 C.M.R. ch. 480, § 4

Current through 2024-51, December 18, 2024

Section 648-480-4 - 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 program participant or by the natural gas distribution utility or any other individual, business, or government agency.

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

(a) Avoided natural gas commodity costs. 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 natural gas transportation,distribution, and storage costs, using estimates of gas transportationmarginal costs. These estimates may be differentiated by time periods that influence costs.

(c) Avoided electric costs including any energy, capacity, and transmission and distribution costs avoided as a result of program implementation.

(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 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, and environmental degradation, 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 gas distribution utility's most recently established weighted cost of capital.

4.Net present value. Cost effectiveness of a gas 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 programs 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 gas distribution utility shall consider the value of the program savings associated with natural gas production and delivery when setting incentive levels.

B.Unquantifiable Cost Effectiveness Test. Gas distribution utilities may implement a program without satisfying the Modified Societal Test if approved by the Commission based on a demonstration that:

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

2. the program satisfies some unquantifiable statutory criterion or an unquantifiable goal or objective established by the Commission in implementing 35-A M.R.S.A. §4711; and

3. the entire portfolio of gas conservation programs taken together and including the cost of the unquantifiable program produces quantifiable benefits that substantially exceed total portfolio program costs.

Gas distribution utilities shall not spend or commit to spend more than 5% of the annual conservation budget on any program found to be cost effective under this Subsection B without express Commission approval of the spending level.

95- 648 C.M.R. ch. 480, § 4