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EXECUTIVE SUMMARY

For many years Americans have been familiar with the U.S. EPA’s miles per gallon ratings which clearly identify the fuel economy of cars. More recently Americans have become attuned to the bright yellow energy guides found on refrigerators, freezers, and air conditioners in household appliance showrooms. Illogically, however, homes are generally not rated for their fuel economy. The lifecycle energy costs of a home, like a car or appliance, are important values which to date have been invisible to consumers, and as a result home buyers assess their decisions based only on homes’ first costs.

Energy Rated Homes of AmericaTM believes that by rating homes consumers will be better armed to make critical home buying decisions. This in turn, will push the entire "shelter industry" (from builders to appraisers to real estate agents to lenders) to focus more on homes’ energy efficiency, an awareness that will inevitably reduce household energy consumption and make housing more affordable.

Based on ratings from ERHA’s Uniform Energy Rating SystemTM, lenders can be confident that homes classified as "efficient" will indeed have lower utility bills and that their home owners will have more money to spend on their monthly mortgage payments. A host of innovative lending practices are being piloted and implemented that take advantage of the transferability of these savings into mortgage payments. Thus lenders are easing and “stretching” home owners’ debt-to-income ratios for energy-efficient homes.

Rating sheets for homes developed from the Uniform Energy Rating System provide an "as-is" rating for the home based on a 100-point scale. An "improvement-options" rating also provides an indication of how homes would rate as well as potential savings if they followed a set of fully detailed retrofit measures, in an improvement sheet. Thus the process of rating a home not only provides a score, but provides the home owner with cost effective and suggested improvements. Furthermore, the funds necessary to carry out these improvements can be added to mortgages, allowing inefficient homes to be upgraded and the cost of improvements financed over the life of the loan.

To date, Energy Rated Homes of America’s Uniform Energy Rating System has been implemented in 12 states using a variety of implementation strategies. Sometimes the program is run by a utility or the state itself, but typically the program is run by a non-profit group and funded through a combination of home owners, builders, and utilities keen on coupling ratings with their new and existing home construction programs.

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EXECUTIVE SUMMARY

Sacramento Municipal Utility District (SMUD) is a case study of a significant utility turnaround. Because of problems at its Rancho Seco nuclear power plant in the late 1980s, SMUD was forced to raise rates several times and was suffering from a lack of public confidence and a demoralized staff. Following on the heels of voter referenda to shut the plant and its continuing maintenance problems, SMUD closed Rancho Seco permanently and thus ushered in a new and exciting era at the utility.

SMUD was very fortunate to be able to purchase replacement power from its neighboring California utilities, which gave it time to chart a new course. SMUD’s insightful Board of Directors hired David Freeman, a strong advocate of public power, to take the helm. Freeman single-handedly has been credited with turning SMUD around, from a despondent position to a utility with power and vision. Freeman’s strategy, reinforced by the Board, was to focus intensely on energy efficiency and to invest proactively in renewable energy resources. Coupled with flexible blocks of purchased power identified in its integrated resource plan, SMUD’s vision crystallized and was clearly aimed at providing heightened levels of customer services to alleviate customer bills in the short term and to provide a highly diversified resource portfolio for a long term and sustainable energy future for the Sacramento region.

Today SMUD offers its customers a comprehensive array of energy efficiency and load management programs and their impacts are impressive. After years of annual DSM expenditures in the range of $3-8 million, in 1991 SMUD’s DSM budget grew to $38 million, reflecting its commitment to the DSM resource. By 1993 the Energy Efficient Refrigerators program, for example, had resulted in purchases of more than 70,000 energy-efficient refrigerators while 63,000 old, inefficient refrigerators had been collected and recycled. The Direct Investment program has provided electric-heat customers with almost 15,000 energy efficiency measures for free. Participants of the Residential Peak Corps program, SMUD’s leading load management program, have installed 96,130 air conditioning cyclers. Through the Shade Tree program approximately 109,000 trees have been planted, and 1,200 solar water heaters have been installed through the Solar Domestic Water Heater program, a program that has now been expanded to promote rooftop solar photovoltaics. Equally impressive results have accrued from SMUD’s commercial and industrial retrofit programs.

While its DSM programs are on track, SMUD has concurrently been promoting renewable energy resources, from centralized and decentralized solar applications to wind generation. SMUD has proven that it is possible to dramatically change course, and to do so for the better. Not only have rates been stabilized, but citizens in Sacramento are now proud of their municipal utility. SMUD has listened to voters’ wishes and invested in the city’s future, concurrently setting a powerful model for electric utilities around the world.

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EXECUTIVE SUMMARY

New England Electric System’s Design 2000 program is focused on increasing the efficiency of projects "where new electrical equipment is being installed as a matter of normal business activity," specifically new construction, renovation, and replacement of failed equipment. These planned energy savings opportunities are what NEES calls "time dependent" opportunities, the focus of the Design 2000 program. Other pre-planned retrofits for the commercial and industrial sector are incented under the Energy Initiative program, NEES’s largest program in terms of costs and savings. Together these programs provided more than half of all NEES’s total DSM energy savings in 1993 and just under half of the capacity savings impacts.

Utilities implementing new construction DSM programs face the fundamental challenge of intervening in the design process at the right time. Suggesting energy efficiency enhancements too late is ineffectual. On the other hand, tracking new construction projects and interfacing with a new building’s permitting, financing, and design is extremely challenging and requires an intimate understanding of the design process. To fulfill program objectives, NEES staff have had to market the program to raise customer awareness of its incentives and technical assistance services, to use all possible information sources to track new construction projects, to assign additional dedicated program specialists to regional offices, and to extensively use outside expertise to provide heightened customer technical services through the program.

Design 2000 provides three customer approaches depending on the size and complexity of the projects, and in accord with the time schedule of the construction project at hand. A Prescriptive Measure Approach is generally used for small, relatively standard projects and provides specific rebates for certain technological upgrades including some interesting, yet generic, process improvements. A Custom Measures Approach is used for more complex projects requiring modelling and design assistance.

The Comprehensive Design Approach is used for large projects to reap maximum savings using an integrated approach whereby at least four major end-uses of electricity must be addressed. Design 2000 pays not only 100% of the marginal costs of efficiency upgrades but also pays for building simulation and technical assistance, including an honorarium to the design team to cover their costs in analyzing the state of the art options for efficiency. By doing so, Design 2000 pays essentially all out of pocket expenses associated with the efficiency upgrades and then provides the participant with lower electricity bills, which is an attractive program selling point and feature especially in soft real estate markets. Depending on the size and complexity of the project, commissioning is also provided to ensure that the original design intent is met.

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EXECUTIVE SUMMARY

Madison Gas and Electric is a small investor-owned utility that sells both electricity and gas in Wisconsin. Despite its size, Madison Gas and Electric (MGE) has been a pioneer in demand-side management. In fact, a 1991 DOE study found MGE to be one of nine leading utilities nationally in the delivery of rebate programs.

The Residential Lighting program provides a snapshot of the utility’s DSM philosophy. The program has evolved substantially over a number of years, with lessons learned at each juncture used to refine the program and hone its success. The program in its current form is now being phased out as its mission is fulfilled. As such, the utility aimed and was successful at significantly increasing the availability and acceptance of CFLs in the residential market. MGE now hopes to use customer education and cooperative efforts with retailers and manufacturers to sustain and increase this market.

Before the Residential Lighting program began, MGE’s customers primarily purchased incandescent lightbulbs due to a lack of awareness and availability of alternatives. MGE aimed to create a program which would help turn the retail marketplace into a reliable, permanent source for high-efficiency products; educate and motivate customers to continue to buy high-efficiency lighting products; achieve maximum customer and utility energy savings at the least cost; and support rather than compete with lighting business allies.

The program has clearly succeeded in fulfilling the transformation of the retailers in the service territory. For instance, in 1990 there were only four retailers in the MGE service territory selling six models of CFLs. Currently there are 62 retailers (out of 100 retailers) selling a total of 63 models of CFLs.

Working with retailers and manufacturers has been one of the most important ingredients of the program’s success. While coupons were distributed directly to customers, later in the program these coupons were provided through stores as well. MGE also offers to pay 50% of cooperative advertising for retailers keen on promoting energy-efficient lighting technologies. Retailers who agreed to handle in-store coupon distribution have been highlighted in several newspaper ads, and lists of vendors stocking CFLs were provided to customers. MGE staff have also met with retailers and manufacturers to promote the program and provided point of purchase displays for shelves and counters, and will continue to do so. MGE has regularly followed-up with retailers to maintain their awareness and thorough understanding of program details and to ensure that they carry a sufficient stock of lamps and fixtures. Retailers will continue to receive training from MGE staff on lighting technologies.

While the program initially sputtered, MGE management was confident in the program’s basic design and thrust. Over time the program’s impact grew dramatically and in recent program years the goals have been exceeded by factors of two, three, and four! Then in 1994 because of the program’s positive impact on the marketplace MGE elected to begin phasing out monetary incentives and focus more on customer education and other means to enhance CFL distribution, purchase, and use

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