Bonneville Power Administration: An Explanation and Description of the Conservation and Renewables Discount

1. Framework for the C&R Discount

One of the four fundamental goals that drove BPA's final Power Subscription Strategy issued on December 21, 1998 was to:

Provide market incentives for the development of conservation and renewables as part of a broader BPA leadership role in the regional effort to capture the value of these and other emerging technologies.

Accordingly, BPA announced its intent to offer a conservation and renewables discount program in the final Power Subscription Strategy as part of this effort to take a renewed leadership role in encouraging the development of more energy efficiency, renewable resources and new distributed energy technologies in the Pacific Northwest. BPA believes that the region will realize substantial value through lower energy costs, less pollution emissions, less investment in transmission and distribution infrastructure, better customer service, and higher reliability by taking advantage of these resources and technologies. This becomes especially important when the region is not in a power surplus situation, and new generation resources are being developed.

BPA wants to be a regional catalyst for capturing this value primarily through market mechanisms. The conservation and renewables discount (C&RD) proposal is one important means of accomplishing this goal. This document presents the latest information about BPA's C&RD. It is designed to facilitate the understanding and discussion that is needed as BPA refines the program as part of its process for establishing power rates for its fiscal years 2002 through 2006.

1.1 Program Objectives

The objectives for BPA's C&RD program are as follows:

• Support the Comprehensive Review's recommendation of dedicating "3 percent of the revenues from the sale of electricity services" to cost-effective conservation, renewable resource development and low-income weatherization in the Pacific Northwest;
• Continue BPA's role as a catalyst in furthering the region's own public purposes goals;
• Support state legislatures and regional power planning organizations as they establish direction for the region's development of conservation and renewable resources;
• Produce real, measurable efficiency gains and renewable energy supplies; and
• Support and maintain BPA's competitive rate position in the power market.

1.2 Key Desired Features

In addition to the objectives outlined above, BPA has worked with a broad range of customers and public interest group representatives to identify the following key features that the C&RD program should strive to accomplish:

• Voluntary choice by power customers of whether and to what extent they participate;
• Local control of funds spent;
• Support for power customers would be proportional to the amount of power purchased from BPA;
• Does not increase BPA's fixed costs, including no "centralized BPA funding" for conservation;
• Maximizes power customer participation in the discount program;
• Simple to administer; integrates easily with power customers? current financial reporting requirements; minimal administrative overhead/costs;
• Avoids having BPA or anyone else serve as the "conservation cop"; and
• Accountability for cost-effective energy savings and renewables investments is maintained at the regional level.

Although these objectives and desired features may set up potential conflicts, BPA views the creative tension that results from having to accommodate a variety of interests and concerns in determining how to achieve these directives to be beneficial. Our efforts to develop a viable C&RD program that will work for the region, and the power customers who will be responsible for its ultimate implementation, can only improve through such a healthy debate.

1.3 Power Subscription Strategy

BPA issued its Power Subscription Proposal on September 18, 1998.

In anticipation of having a conservation and renewables discount mechanism in BPA's Power Subscription Strategy Proposal, BPA formed a Conservation and Renewables Discount Working Group (C&RDWG). This Working Group met seven times over a six-month period to discuss how the C&RD might work. In addition, comments received during the Subscription Proposal's public review process raised several issues and concerns about the proposed C&R discount. To facilitate responding to these concerns, the C&RDWG established six subcommittees to delve into specific issues and prepare recommendations for BPA to consider as it formulated the C&R discount for BPA's initial power rates proposal. These subcommittees conducted 26 meetings over a two-month period. BPA's final Power Subscription Strategy (issued on December 21, 1999) presented information about BPA's "leanings" and direction with respect to the C&RD program. The information and discussions provided by the C&RDWG, including the six subcommittees, contributed significantly in helping BPA shape the C&RD program that is included in the initial rate case proposal.

1.4 Decisionmaking Forums for C&RD Issues

Basically, there are three forums for C&RD decisions. First, there is BPA's Rate Case for FY 2002 ? 2006. This is where most of the "policy" decisions will be made, especially the decisions associated with rate levels and implications. The second forum for C&RD related-decisions is the NPPC's Regional Technical Forum (RTF) and the related follow-on BPA decision process. BPA has asked the RTF to recommend a list of measures that should qualify for the C&RD. The RTF will run a separate, independent public process to develop this list of measures and submit their recommendations for BPA's consideration and approval. BPA will conduct a public process during the Fall of 2000 to adopt the RTF recommendations. The third public forum will deal with C&RD "implementation details" and other administrative type issues. This third process will be conducted by BPA beginning in the Fall of 1999.

The following sections of this summary provide information about BPA's current thinking on C&RD issues that will be addressed in each of these three forums. 

2. C&RD Decisions Addressed in the Rate Case

This section outlines the C&RD decisions BPA has made for the initial power rate proposal scheduled for release August 1999.

2.1 Amount of Funds Available

1. Base Level of the Discount: 0.5 mills per kWh placed on BPA (roughly $30 million per year).
2. Dividend Sharing: the first $15 million of any "dividend" distribution would be available to all C&RD eligible customers as an additional credit (roughly 0.25 mills) for spending on incremental conservation and renewable activities.
3. Allocation Supplement: after the first year of the rate period, BPA will evaluate the allocation of spending for conservation, renewables and low-income weatherization. {Out of the $30 million, renewables is expected to receive about $6 million in investment and low-income weatherization about $4 million according to the Comprehensive Review percentage of spending recommendations.} If either of these purposes receives less than those amounts in year one of the rate period from the aggregated total of individual customer choices, then BPA will make up the difference between actual spending levels in year one and these amounts in year two through its own supplemental spending. Succeeding years of the rate period would receive comparable treatment.

2.2 Allocation Between Categories

BPA will not specify any power customer-level allocation or requirement for expenditures between the categories of conservation, renewable resources and low-income weatherization.

2.3 Leveraging, Incremental Investments and Exemptions

1. Leveraging: the "base" amount will be reimbursed on a dollar credit for dollar spent basis up to the customer's total discount amount; the "dividend" amount will be leveraged a dollar credit for every two dollars spent.
2. Incremental Investments: to encourage additional investment in conservation, BPA will ask that customers certify that their application for the C&R discount is incremental to the conservation investments they would have made absent the C&RD program. For the IOUs, the State PUC should participate in that determination. For the public utilities, a certification by each utility's Board will be requested.
3. Low Income Investments: power customer expenditures for approved low income weatherization measures do not have to be incremental.
4. Renewable Resources: renewable resource investments that qualify for the C&RD credit will be incremental by definition.
5. Exemptions: if states, municipalities or other governmental entities require a utility to invest in new conservation and/or a new renewable resource project, then such actions will obviate the incremental certification requirement. Furthermore, any utility that is spending 3% or more of their retail revenues on qualifying conservation and/or renewable investments during the next rate period will receive the full discount they are eligible for and not be asked to certify that their spending is incremental.

2.4 Forecasting and Local Control

1. Forecasting: each utility's amount of discount available will be forecasted annually based on the load specified in their BPA contract prior to the start of each fiscal year. For the full requirements customers, BPA will use the Subscription Inventory Commitment amount for C&RD forecasting and planning purposes. Annual Adjustments will be made to reflect any significant changes in the load placed on BPA.
2. Local Control: all decisions about what the power customer does with respect to their conservation and renewable investments are up to the customer (i.e., they maintain local control over developing and managing their efforts based on the list of qualifying measures and other program criteria).

2.5 Rate Design and Billing Procedures

1. Applicable Rate Schedules: the C&RD applies to customer loads served by the PF-02, NR-02 and RL-02 rates, to include Slice, exchange and pre-subscription customers whose contracts reference the new rate schedules.
2. DSI Rates: As described in the Compromise Approach, DSIs will be eligible for the C&RD, subject to the same standards and procedures as utilities participating in the C&RD.
3. IOU Loads: the C&RD credit will only be available for qualifying measures that are applied to the IOU residential and small farm loads that benefit from BPA power purchases.
4. GRSP Language: the C&RD will be implemented through language in the General Rate Schedule Provisions (GRSPs).
5. Load Determination: BPA will use the contract (or the agreed upon annual forecasted) load amount for C&RD planning and billing purposes (i.e., the C&RD will not be adjusted for routine load variations during the year).
6. Billing Information: BPA will include an item on each eligible customer's power bill showing the amount discounted (monthly and cumulatively) in expectation of full participation in the C&RD program. This amount will offset the customer's pro rata share of additional revenue collected for the discount activity. Based on the loads established for item 5 above, eligible customers will see zero rate impact on a monthly billing basis.
7. Adjustments Based on Invoices: power customers will submit their invoice {certified as incremental spending} of C&RD expenditures annually and BPA would adjust the C&RD information on the cumulative and monthly bill line items, accordingly.
8. Reimbursement: a "true up" will occur at the end of the rate period or the contract period, whichever is shorter (i.e., C&RD expenditures {certified as incremental spending} compared to amount of C&RD credit available: if less, reimburse BPA the difference; if expenditures are equal to or greater, then the customer's obligation is achieved).

2.6 Accountability

1. Financial Audits: BPA will have the right to conduct financial audits on those activities for which a C&RD credit is claimed.
2. Customer-Level Accountability: accountability at the power customer level is financial only (tracking and reporting the money spent on qualifying measures).

3. Regional Technical (RTF) Support for the C&RD

In a letter dated February 24, 1999, BPA requested that the Northwest Power Planning Council (NPPC) allow the RTF to support BPA's C&RD efforts by recommending a comprehensive list of energy efficiency measures and renewable resources actions that are predetermined to qualify for the discount (see Appendix A). Accordingly, the RTF was established and its charter approved by the NPPC on June 30, 1999. It is anticipated that they will submit their C&RD recommendations to BPA by no later than September 2000.

3.1 List of Qualifying Measures

3.1.1 RTF Support: BPA requested that the NWPPC's RTF develop a recommended list of qualifying measures for C&RD consideration by no later than September 2000.

3.1.2 Measure List: the list of measures should be extensive, covering a broad range of measures, projects and activities that qualify for the discount (see Appendix A for details).

3.1.3 Evaluation of Savings: BPA asked the RTF to conduct periodic energy savings performance evaluations, but only at the regional level, with appropriate power customer involvement, for future adjustments to the savings credited for measures and program designs.

3.2 Process for Approving the RTF's Recommendations

BPA will conduct a public process to adopt/approve, with appropriate modifications, the list of recommended measures submitted by the RTF, to include establishing the amount of the discount credit available for each measure on the approved list to conclude by no later than January 2001. This process will also be used to identify the "reduced list" for Option A customers discussed below. 

4. C&RD Implementation Issues

Beginning in the Fall of 1999, BPA will conduct a separate forum/process for determining the amount of credit available to participating customers for the support services (i.e., non-savings activities and costs) associated with running the C&RD program (i.e., administrative, advertising, evaluation, R&D, etc.). RTF input was requested for conservation and renewables RD&D related activities.

4.1 Customer Options for Conservation

4.1.1 Small Utility Option: those customers who purchase 7.5 or less aMW from BPA will have the ability to choose an alternative approach with minimal requirements (see Appendix B for details).

4.1.2 Other Utility Options: customers who purchase more than 7.5 aMW from BPA will have a choice between the following two options:

Option A ? Cost Reimbursement: Full cost reimbursement on a dollar-for-dollar basis without regard to energy efficiency cost-effectiveness, to include the following criteria: (1) a cap on the amount of administrative costs that can be charged, expressed as a percentage of the total discount amount available. This percentage would be variable according to the size of the utility and its system density (that is, the allowable percentage is higher for smaller or lower density utilities); (2) a similar cap on the percentage of expenditures for advertising and promotional expenses; (3) for investments in utility system upgrades (i.e., "own facility" investments), only the additional costs attributable to energy efficiency improvements (calculated from engineering estimates) would qualify for the discount, not the full cost of the system upgrade (i.e., reducing line losses would be eligible, but capacitor replacements to improve power factor would not); and (4) a reduced list of pre-approved measures would have some controversial measures that are clearly not cost-effective either removed from the list, or would qualify only for the portion of the cost that was cost-effective from an energy efficiency standpoint. OR

Option B ? Cost Plus: A customer's conservation discount is capped by their aggregate cost-effectiveness limit (i.e., measure specific cost-effectiveness can be combined for a total utility aggregate number), to include access to the full pre-approved C&RD list of conservation measures. Also, Option B customers will have an incentive component {see Appendix C for an explanation of a proposed incentive formula} that encourages investments in the more cost-effective measures.

4.1.3 Selecting an Option: customers can choose only one option for the entire rate period or contract period, whichever is shorter.

4.1.4 No Mixing Customers: from a pooling standpoint, organizations of customers will not be allowed to mix together Option A and Option B customers.

4.1.5 No Low Density Accommodation: no special accommodation for low density utilities will be included in the C&RD Program beyond that outlined in the under 7.5 aMW alternative.

4.1.6 BPA Support: BPA pledges to work closely with those utilities wishing assistance in finding effective ways in which to invest their conservation money locally.

4.2 Pooling, Trading and Banking Credits

4.2.1 Pooling: organizations of BPA's power customers authorized to implement conservation and renewable resource programs for their member utilities will be allowed to pool C&RD credits across the service territories of the organization's member utilities. {see Appendix D for a proposed list of rules for pooling organizations; these rules will be finalized as part of the Implementation Issues process this Fall}

4.2.2 Trading: there will be no trading of C&RD credits.

4.2.3 Banking Credits: power customers can carry over or "bank" both positive or negative C&RD credits for more than one year up to the total C&RD credit amount available, but they can not carry them beyond the contract or rate period which ever is shorter.

4.3 Tracking and Reporting

1. Tracking and Reporting: tracking and reporting C&RD results will flow from the power customers? annual financial reports that are certified as incremental spending which are submitted to receive the C&RD credit.
2. Renewables: for renewables, the credit will be based on the annual electrical output of any eligible project in which the customer invested/purchased. This annual statement of production will be used to track and report renewable resource accomplishments.
3. RTF Reports: BPA will ask the RTF to provide information about the regionwide C&RD program accomplishments (kWhs saved for conservation; kWhs delivered for renewables) on an annual basis. Again, this information will be based on the annual invoices submitted by power customers annually to receive their C&RD credit.

5. Criteria for Renewable Resources Eligible for the C&RD

The C&RD approach is designed to encourage incremental renewable resource development in the PNW. The developer will carry risks associated with renewable resource development. The following provides more detailed information about C&RD eligibility criteria for renewable resources.

5.1 Type of Resource

Energy from the following types of renewable resources and activities will be eligible for the discount:

5.1.1 Solar: electricity produced by solar heat and light. This includes power from solar Photovoltaic systems and solar thermal systems.

5.1.2 Wind: facilities that capture wind energy to drive an electric generator.

5.1.3 Geothermal: facilities using naturally-occurring underground heat to generate electricity.

5.1.4 Biomass: facilities that generate electricity using heat derived from combustion of plant matter, or from combustion of gases or liquids derived from animal waste or sewage, or from combustion of gases (but not toxic liquids) derived from plant matter, or from combustion of gases derived from landfills, or which derive hydrogen from these same sources to generate electricity using fuel cells.

5.1.5 Hydroelectric: hydropower facilities outside of protected areas as defined by the Northwest Power Planning Council and other federal or state agencies and applicable statutes.

5.1.6 Direct Application Renewables: equipment such as solar water heaters that convert energy from renewable sources directly to useful non-electric products to reduce the electric power requirements of a utility customer.

5.1.7 Hybrid facilities: the net electricity produced by the qualifying renewable fraction.

5.2 Location of Resources

Energy must be produced from facilities meeting the following location criteria:

5.2.1 Located in the Pacific Northwest Region as defined by the Northwest Power Act;

5.2.2 The currently permitted Wyoming Wind Project at Foote Creek Rim and Simpson Ridge in Carbon County, Wyoming, with the exception of the 41.4-MW Phase I development at Foote Creek Rim;

5.2.3 Geothermal projects developed at the Glass Mountain, California, Known Geothermal Resource Area; or

5.2.4 Projects shown by the applicant to substantially displace operation of regional generation resources (subject to BPA approval).

5.3 When Should a Resource Become Eligible for the Credit

5.3.1 Facilities that begin commercial operation after May 1, 1999, will be eligible for the credit.

5.3.2 The resource must be online by the end of the rate period.

5.4 Resources Should Reduce Bonneville's Load Obligation

Credit will apply to regional resources that are used to serve customers? loads and which therefore reduce Bonneville's load obligation. The credit will not apply to resources sold outside the region. 

5.5 Amount of C&RD Credit Available

The amount of credit earned by eligible facilities in Categories I, II, and III will be based on actual net generation. The amount of the C&RD credit earned by eligible facilities or activities are as follows: 
 

+ These resources are too small to meter and will be treated like conservation (i.e., customers choose one of three options: under 7.5 aMWs, Option A or B, as discussed earlier).

* Wind or solar resource assessment refers to the existing programs administered by Oregon State University and the University of Oregon, respectively.

** What constitutes a "new technology" and the appropriate level of credit will be determined by the BPA on a case-by-case basis.

# Capped by the amount of the C&RD available to the customer.

5.6 Other Qualifying Expenditures

5.6.1 Costs incurred by Bonneville customer utilities to encourage development of qualifying consumer-owned distributed generation facilities. Costs associated with activities such as low-cost loans, grants, and design and installation services would be included. The credit applicable to unmetered generating facilities and direct application facilities will be established (deemed) and recommended by the RTF to BPA for approval and generally based on the Category I and II per kilowatt-hour credits described below.

5.6.2 Expenditures on qualifying renewable resource R&D activities ? The RTF should develop and recommend for BPA approval a list of preapproved R&D activities. BPA will consider other R&D activities on a case-by-case basis, using criteria tied to the objectives described above. Information from qualifying R&D activities should be publicly available. Preapproved activities may include funding for regional wind and solar data collection.

5.6.3 Purchases of "green power," as long as the facility supplying the power meets the other eligibility criteria and documentation, can be provided upon request.

5.6.4 A green power purchase from Bonneville, if Bonneville invests the proceeds of the sale in new renewable resources. The amount of credit would be the difference between the average cost of the Bonneville power the green power replaces (e.g., PF-02) and the price of the Bonneville green power product.

5.6.5 Donations to the Bonneville Environmental Foundation, to the extent the donation is dedicated to the purchase of new renewable resources and R&D activities meeting the other eligibility criteria.

5.6.6 Other incentives or credits received by a qualifying project (e.g., the Federal Renewable Energy Production Incentive) will not be a consideration in deciding whether a proposed facility should receive a credit under this program, nor would it reduce the amount of credit received.

Appendix A

RTF Work Products Needed to Facilitate

BPA's Conservation & Renewables Discount

The Bonneville Power Administration (BPA) is responsible for developing a list of measures that will qualify for its conservation and renewables discount (C&RD) and the level of credit available for any given measure on the list. BPA is requesting that the Northwest Power Planning Council's (Council) proposed Regional Technical Forum (RTF) Advisory Committee identify and recommend a list of qualifying measures and related information that BPA can consider for use in the C&RD program. With respect to the C&RD program, BPA views the work of the RTF to be advisory and technical in nature. BPA may approve or modify the list and establish the amount of discount available for each measure on the approved list through a separate process after the RTF submits the list of recommended measures to BPA. In another independent process, BPA will addresses the amount of credit available for the activities and costs associated with running the C&RD program (i.e., administrative, advertising, evaluation, R&D, etc.) that do not directly result in electricity savings or production.

Information Requested from the RTF

1. The RTF should prepare a comprehensive list of recommended conservation and renewables RD&D measures by no later than September 1, 2000. In establishing the list, the RTF should include, but not be limited to, consideration of the following types of activities:

• the full range of conservation measures and demand-side energy efficiency activities for which "deemed" savings can be determined;
• appropriate program standards and guidelines;
• renewable resource RD&D options;
• quality control criteria for the direct application renewables and distributed resources, with consideration of criteria that have been developed by states and others;
• efficiencies in utility transmission and distribution systems;
• Federal and state-mandated public purpose utility activities and programs;
• alternatives for contributing funds to energy efficiency and renewables-related organizations and activities (e.g., the Bonneville Environmental Foundation (BEF), the Northwest Energy Efficiency Alliance (NEEA), local low-income weatherization programs, etc.);
• "reductions in electric power consumption as a result of increases in the efficiency of energy production?" (see Sec. 3.(3), 1980 Power Act); and
• "Reductions" in electric power consumption as a result of increases in the efficiency of energy consumption (operational adjustments, maintenance procedure changes, behavioral modifications, training, etc.).

2. Protocols or methodologies for identifying the energy savings and value of conservation in unique facilities and situations (e.g., large commercial/industrial sites).

3. A process for resolving differences between sponsors? estimates of savings and the"deemed" amount for measures on the list.

4. Measures on the RTF recommended conservation list should have three components:

(a) the Definition of the Measure;
(b) the Definition of the Electricity Savings; and 
(c) the Definition of the Value to the Region (from an electric system standpoint).

5. The RTF should develop the C&RD conservation list in a very collaborative manner with ample opportunities for BPA's customers and other interested parties to participate in the process.

6. The RTF should establish a procedure and schedule for updating the C&RD list.

7. The RTF should establish a procedure for tracking and reporting C&RD results per dollar allocation of spending, at a regional level. Information about the allocation of spending among conservation, renewables and low-income weatherization as outlined by the Comprehensive review in Table 1 of their Dec. 12, 1996 report should be included.

Definition of Conservation Measures

1. For the list of "standard" qualifying measures, where possible, the RTF should include two or more different levels of quality assurance as part of the measure description. These quality assurance definitions should be based on existing information and historical experience. In addition, the RTF should define a protocol for customers who want to pursue measures where no quality assurance definition is provided.
2. The RTF should define the "baseline" from which savings will be identified for measures or measure categories on the list. These baselines should reflect what is standard practice absent customer efforts. This should include protocols for establishing "baselines" for non-standard measures. Also, the RTF should identify parameters for when the "baseline" will change.
3. Fuel switching and load building activities should not be included on the list of qualifying measures.

Definition of Conservation Savings

1. The value of the savings should reflect the higher confidence and precision resulting from the more defensible predictions of energy savings and the greater likelihood of effective installations corresponding to the level of quality assurance undertaken. Estimates of savings should take into consideration climatic information and should describe the seasonal and daily shape of the savings where appropriate.
2. The RTF should look at modifications in the established baseline for measures on the list, especially if there are adjustments in relevant Federal standards or State energy codes. These changes should be reflected in the approved list of qualifying measures (measure by measure) on a real-time basis, rather than waiting for a wholesale update of the entire list.

Definition of Conservation Value

1. For determining the value of the measures on the list, the RTF should use the life of the measure.
2. The shape of the savings (daily and seasonally) should be considered in order to value both capacity and energy, when it is reasonably feasible to do so.
3. The RTF should advise BPA on which procedure they used for determining avoided costs to the system for establishing the savings value for measures on the list.
4. In determining value to the system, the RTF should take into consideration, where feasible, the relationship to load centers/distribution/transmission benefits, etc.
5. Electricity savings and total energy savings, when appropriate, should be taken into consideration when establishing the value of measures on the list.

Evaluation of Conservation

In support of BPA's C&RD program, the RTF may be requested to perform a limited number of targeted evaluations. These evaluations would focus on those measures or programs for which there is little evaluation information and that are accounting for relatively large proportions of the available discount. The information developed through these evaluations would be used only to improve estimates of the achievable savings on a going forward basis. This information would not be used to highlight any individual utility's performance or to retroactively reclaim any discount already earned.

Renewables

With respect to renewables, the RTF should:

1. Develop a list of pre-approved RD&D activities.
2. Develop quality assurance criteria for direct application renewables and distributed resources that will be credited based on a "deemed" amount of output. (The RTF should consider applicable existing criteria when establishing criteria for direct application and distributed resources.)
3. Develop evaluation criteria for RD&D proposals and play an ongoing role in determining whether or not a proposed activity is RD&D on a case-by-case basis.
4. Develop criteria for determining what constitutes a "new" facility, as opposed to an expansion or addition.
5. When requested by BPA, assist in evaluating proposals for which eligibility may be unclear. (For example, the RTF may be asked to help determine the eligibility of a facility that is located outside the region but also displaces regional resources.)

Appendix B

BPA's Conservation and Renewables Discount

The Small Utility Track

Those utilities eligible and participating in the small utility track would receive their full BPA conservation credit by certifying in an annual letter to BPA that they have provided their customers the small utility track elements listed below.

The small utility track is strictly voluntary. A small utility may choose to seek eligibility for the credit under the regular program. Or the small utility may choose to do nothing; although in that case, the utility would not be eligible for the credit.

Utility Responsibilities

1. The utility shall make available to all residential customers of the utility information about:

a. cost effective energy conservation measures;
b. energy conservation measure financing available to utility customers; and
c. energy conservation or renewable resource incentives such as state tax credits or low interest loans.

2. Upon customer request, the utility shall provide or arrange to provide an energy assessment of the customer's dwelling.

3. The utility may satisfy the requirements above by:
(a) joining an energy conservation organization (to take advantage of the pooling of C&RD credits approach);
(b) contracting with an energy service provider; or
(c) another utility.

4. Those utilities eligible for the Low Density Discount may alternatively to #s 1 and 2 above provide appropriate energy efficiency information to their irrigation and agricultural customers.

5. The utility shall provide BPA an annual letter certifying the above requirements have been met (typically, these letters are signed by the utility Board).

OR

The utility can simply participate in the regular C&RD program offered to BPA's power customers.

BPA Responsibilities

1. BPA shall make available to its small track utilities a sample customer information letter or bill stuffer to meet the requirements of #1 above.
2. BPA shall make available to its small track utilities its Northwest Energy Efficiency Business Listing and the list of energy services firms and organizations which have a signed business alliance agreement with BPA.
3. BPA shall be a conduit for providing information about conservation and renewables information through its small utility account executives (i.e., NEEA programs and activities, DOE, EPRI and E-Source information, etc.).

Appendix C

INCENTIVE COMPONENT FOR OPTION B OF THE CONSERVATION DISCOUNT PROGRAM

PARTIAL REQUIREMENTS CUSTOMERS ONLY

Below is the rationale and proposed methodology for calculating incentives under Option B (cost plus choice) of the Conservation Discount offered by Bonneville.

I. Key policy recommendations affecting incentive calculations include the following:

1. Utility customers or organizations of customers shall declare either Option A or Option B. They may not switch between options A and B during the entire rate period or contract period.
2. Organizations of customers may not mix together Option A and Option B.
3. The maximum utility credit shall be the utility load capped at .05 mills times the load placed on BPA.
4. The calculation of the incentive will be based on the aggregated incremental energy savings and value generated by the C&RD Program. Individual measures or parts of programs will not be considered separately from the entire program. The one exception is the low-income program.
5. Low-income program costs shall be fully reimbursed on a dollar- for - dollar basis for qualified measures (we may consider reimbursing costs as a percentage of the proportion of load on BPA).
6. A Conservation Efficiency Credit is 25 percent of the difference between the proportion of cost and the proportion of value created.
7. The incentive will be driven by the costs, value and savings resulting from the utility's incremental C&RD spending. The incremental spending is the additional amount that the utility would have spent over and above what they would have done in the absence of the C&RD Program.

II. The methodology for determining the incentive payment for incremental conservation under Option B is derived by totaling the low-income program costs, qualifying (non-low income) program costs, and the conservation efficiency credit. To arrive at these three figures, the following calculations on program costs and conservation value must be made. Calculate the:

1. Maximum Utility Credit by multiplying the average megawatt load placed on BPA by 0.5 mills/kWh.
2. Eligible Conservation Costs by subtracting low-income costs from the incremental utility or organization's C&RD Program costs.
3. Conservation Value to the region directly from the deemed savings list of Qualifying Measures for C&RD.
4. Proportional Utility Incentive of the value of the conservation the utility or organization is eligible to claim by dividing the load placed on BPA by the utility's total load.
5. Proportional Value of conservation the utility or organization is eligible to claim by multiplying the total deemed savings value (c) by the percentage of the total value of conservation the utility or organization is entitled to claim (d).
6. Proportional Program Costs by multiplying non-low income program costs (b) by the proportional Utility Incentive (d).
7. Delta Value of conservation by subtracting the proportional program costs (f) from the proportional value of conservation (e).
8. Conservation Efficiency Credit designated as .25.
9. Amount of Conservation Efficiency Credit is simply the Conservation Efficiency Credit (.25) times the Delta Value (g).

III. An illustration of Option B calculations based on a hypothetical utility.

The following illustrates the amount of reimbursement credit a utility approximately the size of EWEB would receive under Option B if the utility spent only an incremental $500k on conservation, including $50k for low-income weatherization, and their total MW load was 250 with a proportional load on BPA of 100 AMW.

Appendix D

Bonneville Power Administration

Conservation and Renewables Discount 
Proposed Rules for Pooling Organizations

To facilitate effective and efficient implementation of the C&RD, BPA's power customers are authorized to implement conservation and renewables resource programs that qualify for C&RD through agreements with organizations that implement conservation programs, renewables programs, or both. Implementation of programs, reporting and other responsibilities to qualify for and receive the C&RD may be assigned to such organizations and pooled among member utilities and within the service boundaries of the members. For the purposes of the C&RD program, the following rules shall apply for organizations and their member utilities:

1. There must be a separate and distinct agreement between BPA, the organization and its member utilities that authorizes the organization to provide C&RD program information and reports to BPA on behalf of the member utilities. This agreement will permit implementation records to be kept on behalf of the member organizations and the submission of an annual report that covers all members, and will exempt BPA from responsibility for performance or financial agreements between the association's members. The agreement between member utilities and the implementing organization must authorize BPA to audit records to insure that the requirements have been met for the discount claimed in behalf of the member utilities.
2. BPA's GRSPs will stipulate that it is OK for organizations to implement the C&RD for its member utilities provided an agreement (as mentioned in item 1 above) is in place.
3. All member utilities must commit their entire C&R discount amount available to them during the rate period (10/1/2001 through 9/30/2006) for the entire rate or BPA power sales contract period, whichever is shorter. That is, member utilities will not be allowed to withdraw their C&RD credit from the organization after one or more years and they must commit 100% of the C&RD credit for the 5-year rate period to the organization. (In fact, what member utilities are doing is allowing the organization to implement the C&RD program for them, to include providing to BPA information on annual expenditures under the program for which they are claiming the C&RD credit and any "true up" adjustments that may be required at the end of the contract or rate period.)
4. Rights and responsibilities for C&RD may not be further assigned without the express written agreement of BPA.
5. Utility members and the organization agree that BPA will allocate any C&RD credits earned on behalf of member utilities on a pro rata basis for the total C&RD amount authorized for C&RD credits and reported annually by the organization.
6. Each member utility is required to separately submit to BPA an annual certification of incremental spending from their Board. This documentation should accompany the annual invoice of expenditures that will be provided by the organization. (The expenditures will be made by the organization assigned responsibility for implementation and reporting the C&RD program it member utilities.