Public Service Electric & Gas Company’s Standard Offer program is a revolutionary program for many reasons. First and foremost, rather than paying customers for energy savings either using prescriptive or custom rebates, the Standard Offer pays customers set amounts for actual energy savings at specific periods. Thus savings during summer peak periods for electricity, and during winter peak periods for gas, are rewarded at higher levels than savings during off-peak periods. Essentially, the Standard Offer is uniquely tailored to the needs of PSE&G and its customers.
A second prominent feature of the program is that savings must be verified in order to be eligible for incentives. The New Jersey Board of Public Utilities, along with utilities and other parties in the state, worked together to develop one of the nation’s most comprehensive and rigorous verification protocols. Just as the output of power plants can be measured and verified within one or two basis points plus or minus, demand-side management savings in New Jersey must meet similar criteria, assuring the utility and its ratepayers energy and capacity savings that not only match its load profile but fulfill a similar level of confidence that has become expected on the supply-side.
A third feature of the program relates to its organization and structure. Virtually any customer, energy service company, or third party can earn Standard Offer payments for measured savings. To facilitate this process, PSE&G was allowed by the New Jersey Board of Public Utilities to set up a subsidiary, Public Service Conservation Resources Corporation (PSCRC), to operate with a dual mission. First, PSCRC was created to foster a competitive environment for energy services within PSE&G’s service territory by providing financing for efficiency retrofits. Second, PSCRC was allowed to earn profits through its investments in energy efficiency services -- which in turn flow to the company’s shareholders -- without directly performing retrofits but instead by hiring third parties to do the actual work.
In addition to providing financing for a range of energy service companies, PSCRC aggregates customers too small to apply directly to PSE&G for payments. It also works in hard-to-reach market segments such as schools and multi-tenant commercial situations. Like other participants in the program, PSCRC delivers energy efficiency services to customers and is then paid for savings by PSE&G through the Standard Offer mechanism. PSCRC earns a profit for its parent utility by delivering savings at costs below the Standard Offer prices and competing with private energy service companies in the open market. The result of each of these unique factors has been one of the largest DSM programs in the country, with literally hundreds of millions of dollars on the table.
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