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HomeMy WebLinkAboutEnergy Conservation & Management Plan Volume 1 Program Analysis & Plan 1987 ALASKA ELECTRIC LIGHT AND POWER COMPANY AND THE JUNEAU ENERGY ADVISORY COMMITTEE ENERGY CONSERVATION AND MANAGEMENT PLAN Volume 1: Program Analysis and Plan PREPARED BY CHMHILL in association with SYNERGIC RESOURCES CORPORATION APRIL 1987 eee Engineers Planners oF Economists ME scicniisis April 30, 1987 K14864.N0 Messrs. Bill Corbus and David Stone Alaska Electric Light and Power Company 134 North Franklin Street Juneau, Alaska 99801 Gentlemen: We are pleased to present to you our final report on the energy conservation and management plan for Alaska Electric Light and Power Company (AEL&P). The report is in two vol- umes. Volume 1 contains the program analysis and plan. The tan pages at the beginning of this volume present a summary of our findings and recommendations. Volume 2 contains four task reports prepared as part of the plan's development. The detailed technical analysis in these reports was the basis for the program information in Volume 1. As you know, this plan was developed under the joint direc- tion of AEL&P management and the Juneau Energy Advisory Committee. The analysis was conducted by CH2M HILL in association with Synergic Resources Corporation (SRC). We gratefully acknowledge the contributions of your management team and the Juneau Energy Advisory Committee for their guidance and direction. We also wish to express our appre- ciation to SRC for their technical contributions to the plan, especially to Task Reports 2, 4, and 6 in Volume 2. A key part of the plan is a flexible marketing program that will promote either conservation measures or the use of sur- plus hydroelectric energy, depending on Juneau's energy sup- ply and demand conditions. For periods of hydroelectric shortages, the plan provides direction for the marketing of conservation measures to reduce electricity consumption by AEL&P customers. For periods of hydroelectric surplus, the plan provides direction for marketing the surplus power. This approach will increase customer use of energy that otherwise would be wasted through the release of reservoir overflows. CH2M HILL Seattle Office 777 108th Avenue, N.E., Bellevue, Washington 206.453.5000 P.O. Box 91500, Bellevue, Washington 98009-2050 Messrs. Bill Corbus and David Stone Page 2 April 30, 1987 K14864.NO0 We have enjoyed working with you, your staff, and the Juneau Energy Advisory Committee, and we look forward to being of continued service to you and the Juneau community. erely, Si David A. Gray Manager, Economi Department les:se323/038 ALASKA ELECTRIC LIGHT AND POWER COMPANY AND THE JUNEAU ENERGY ADVISORY COMMITTEE ENERGY CONSERVATION AND MANAGEMENT PLAN Volume 1: Program Analysis and Plan PREPARED BY CRHMHILL in association with SYNERGIC RESOURCES CORPORATION APRIL 1987 PREFACE This report contains an energy conservation and management plan for Alaska Electric Light and Power Company. The plan was prepared by CH2M HILL in association with Synergic Re- sources Corporation under a contract dated August 15, 1985. iii SUMMARY OF FINDINGS AND RECOMMENDATIONS PROGRAM GOALS Alaska Electric Light and Power Company (AEL&P) has three general goals as an electric utility: (1) to provide reli- able and safe electric service, (2) to minimize the cost of electric service to customers over the long run while main- taining AEL&P's financial integrity, and (3) to use electric resources efficiently. These three general goals of the utility were adopted as goals for its energy conservation and management program. The most obvious goal that the pro- gram will help achieve is efficient resource use. In addi- tion, the program is intended to reduce the cost of electric service in the long run. To meet this goal, the program was designed to pass the "no-losers test." Simply stated, a program that passes the no-losers test will induce either energy conservation or the use of surplus hydroelectricity without causing the utility's rates to rise above what they would have been without the program. To reflect the fact that this program is intended to keep rates low by marketing low-cost energy during periods of hydroelectric surplus, and marketing conservation during hydroelectric deficits, we call it an "energy conservation and management program." This report contains the plan for this program. For simplicity, we sometimes abbreviate our reference to the overall program and plan by calling them the "conservation program" or "conservation plan." MARKET ANALYSIS: SYSTEM LOADS, END USES, COSTS, AND RATES Within AEL&P's service area, there are substantial end uses of electricity for space and water heating. These uses pre- sent the greatest opportunities for energy conservation. The marginal costs associated with changes in AEL&P's load are an important factor in determining the cost effective- ness to AEL&P of specific conservation measures. Planning for the adoption of these measures is complicated by the fact that AEL&P's marginal cost of energy is projected to change dramatically twice within the 10-year period for which the program is planned. When the analysis for the conservation plan was originally conducted, AEL&P was forecast to meet its marginal loads with diesel generation through the winters of 1986-87 and 1987-88. Marginal operating costs were projected to be 7.9 cents per kilowatt-hour (kWh). Starting in the fall of 1988, AEL&P's marginal cost was projected to drop to 2.9 cents per kWh with the advent of a new hydroelectric supply from the completion of the Crater Lake addition to the Snettisham Hydroelectric Project. The price of 2.9 cents per kWh assumes that the Alaska Power Adminis- tration (APA) will not raise its current rates for power from Snettisham. AEL&P's marginal costs were projected to remain low until load growth required that new generation resources be added in the mid-1990s. At that point, AEL&P's marginal costs were projected to be about 12.4 cents per kWh. Since these marginal cost projections were made, conditions facing AEL&P have changed in two significant ways. First, the general economy has entered a recession that could last for several years. As a result, the long-term trend of sig- nificant increases in AEL&P's energy requirements ended in 1986 with a sales decrease of about 4 percent, and loads could continue to remain low or decrease even further. APA may increase its wholesale rate to AEL&P for Snettisham and Crater Lake energy if sales are not as high as those that were originally projected and used to justify the construc- tion of the Crater Lake project. Second, the weather has produced a substantial runoff for hydroelectric generation during the winter of 1986-87. The result is an abundance of hydroelectricity, making it unlikely that diesel generation will be needed during the winter of 1986-87. The same pos- sibility exists for the winter of 1987-88. Under these con- ditions, AEL&P's marginal costs are likely to remain low for most of 1987, 1988, and beyond. Over the longer term, the need for new generation resources after the completion of Crater Lake may be delayed to a date later than originally projected. However, once the need for a new generation resource develops, AEL&P's marginal cost of energy will increase dramatically. PLANNING PHASES To reflect projected changes in AEL&P's load and resource conditions and associated swings in the marginal cost for generated energy, the energy conservation and management plan was developed around three phases or changes in AEL&P's energy supplies, marginal costs, and future supply outlook. Phase 1 was defined as the period between now and when Crater Lake will begin supplying energy to Juneau (projected for fall of 1988). Phase 2 was defined as the period when AEL&P has access to abundant surplus energy from Crater Lake. Phase 3 was defined as a future period beginning when loads are sufficiently high to warrant serious consideration of developing new resources in addition to Crater Lake. vi PHASE 1: PRE-CRATER LAKE PERIOD Under original projections of high marginal costs for diesel generation by AEL&P in the winter, space-heating conserva- tion measures were found to be cost-effective for the utili- ty and its customers. However, with the changed conditions AEL&P now faces, these conservation measures would not be cost-effective to the utility and thus would fail the no- losers test. Accordingly, we recommend that the initial steps in AEL&P's energy conservation and management program be limited to startup activities that will establish the program for Phases 2 and 3. These steps could include de- velopment of staff expertise in conservation and dual-fuel measures (which are described below as part of Phase 2) and preparation of promotional materials for subsequent phases. Development of staff expertise is essential for answering customer questions thoroughly and consistently. PHASE 2: PERIOD OF CRATER LAKE HYDROELECTRIC SURPLUS Phase 2 will begin with the completion of the Crater Lake project. At that point, Juneau will have a substantial hydroelectricity surplus. The major objective of AEL&P's energy conservation and management program will be to make efficient use of this surplus energy, which would otherwise be lost when water available for hydroelectric generation is released in reservoir overflows. To the degree that this potential energy can be saved from loss through overflows, it will be conserved. One market AEL&P has identified to meet this objective is service to dual-fuel heating systems. A dual-fuel heating system is one that can use either electricity or another form of energy as its sole source of heat for a sustained period, and can comfortably and uniformly heat each occupied room of a home or commercial building. If an oil furnace is used as part of a dual-fuel system, its heat distribution system should have zone control to ensure that each room can be heated evenly and comfortably for the long periods when surplus hydroelectricity for heating might be unavailable. We found that, for dual-fuel service to be cost-effective under current oil prices, a substantial discount in the electric rate for dual-fuel service would need to be of- fered. The retail rate would need to be even lower than the 2.9 cents per kWh wholesale rate AEL&P currently pays to APA. Accordingly, a discounted rate for interruptible serv- ice from APA would be required. To this end, AEL&P has pro- posed to APA, and APA is considering, a reduced rate for interruptible wholesale service. vii Under current conditions, if the retail dual-fuel rate were about 2.0 cents per kWh, it is likely that AEL&P could suc- cessfully market dual-fuel service in the following three target market sectors: zs New residential and small commercial construction ° Customers who are considering oil-fired, forced-air systems ° Larger customers who are considering oil- fired hydronic heating systems 2ie Oil heating systems in existing residential and small commercial buildings ° Customers with forced-air systems ° Larger customers with oil-fired boilers whose electric service can be expanded to include an electric boiler without an upgrade of the electric service panel ie Large commercial customers with oil heating systems Projected paybacks for residential and small commercial in- vestments in dual-fuel service are shown in Table S-l. A portion of AEL&P's firm electric heat market might also be inclined to convert to dual-fuel service. However, if firm electric heat customers were to shift to dual-fuel service during Phase 2, it would be disadvantageous to AEL&P and could cause the dual-fuel program to fail the no-losers test. This is because a shift by electrically heated cus- tomers from firm to interruptible service would not increase the use of surplus energy, but would reduce AEL&P revenues substantially. These revenue reductions would be signifi- cantly larger than associated reductions in AEL&P marginal costs and would therefore result in the need for a rate increase. Our initial analysis indicates that a large shift from firm electric heat to dual-fuel heat is not economical with one possible exception. As discussed below, if dual-fuel sys- tems are loosely defined to include oil or propane heaters without zone control, shifts from firm to dual-fuel service could prove feasible for some customers. However, if AEL&P offers dual-fuel service only for heating systems that fully meet the criteria for a dual-fuel heating system as dis- cussed above, such shifts would be prevented since systems without zone control would not qualify for dual-fuel service. viii Table S-1 PAYBACK PERIODS FOR DUAL-FUEL SYSTEMS ASSUMING A DUAL-FUEL RATE OF 2.0 CENTS PER kWh AND CURRENT MARKET CONDITIONS Assumptions Dual-Fuel Rate: 2.0 cents per kWh Standard Energy Prices Fuel oil: 85 cents per gallon Firm electricity: 8.0 cents per kWh Effective Duel-Fuel Energy Price Discount Compared To: Fuel oil: 1.5 cents per kWh Firm electricity: 6.0 cents per kWh Customer Payback Period Payback Period for Given Annual Heating Requirements (years) 5,000 10,000 15,000 20,000 Dual-Fuel Action, Cost kwh kWh kWh kWh Add Electric System to Fuel Oil System $ 500 (Retrofit forced-air systen)°”” 6.7 3.3 252 1.7 $ 1,000 33.3 6.7 4.4 3.3 $ 1,500 (Add electric poidar)ore 20.0 10.0 6.7 5.0 $ 2,000 26.7 py 8.9 6.7 $ 2,500 33.3 16.7 11.1 8.3 Add Fuel Oil or Propane to Electric System $ 2,000 (Add 2 propane wall units)” 6.7 3.3 222 er $ 2,500 (Retrofit forced-air system)* 8.3 4.2 2.8 zou $ 3,000 10.0 5.0 3.3 2.5 $ 3,500 Bie? 5.8 3.9 2.9 $ 4,000 (Retrofit electric boiler)* 12.3 6.7 4.4 3.3 $ 4,500 15.0 15 5.0 3.8 $ 7,500 25.0 12.5 8.3 6.3 $10,000 (Add oil forced air or boiler system to baseboard system)” 33.3 16.7 Idk 8.3 a. Example of specific investment. Excludes required investment of $500 for load management hardware. b Assumes no upgrade in electric service panel is required. ix Nevertheless, firm electric heat customers may begin convert- ing from firm electric heat to dual-fuel or fuel-oil-only heating systems for reasons other than financial savings. Under these conditions, we recommend that AEL&P consider lowering the rate for firm electric heat in the winter and offset the decrease by raising rates in the summer. Beyond this strategy, if customers are still intent on converting to oil-heating systems, AEL&P may want to persuade them to install dual-fuel systems instead. We recommend that AEL&P devote more market research to ex- isting electric heat customers to estimate the potential losses of firm electric sales during Phase 2 of the energy conservation and management plan. If losses in firm elec- tric sales appear to be high relative to gains from conver- sion to dual fuel by customers who formerly heated with fuel oil only, the economic soundness of the dual-fuel program could be jeopardized. PHASE 3: CONSERVATION PERIOD TO DELAY OR AVOID ADDITIONAL GENERATION RESOURCES Once use of Crater Lake generation has begun to meet firm loads and those loads are forecast to grow, AEL&P should begin Phase 3 of its energy conservation and management pro- gram. At the point that new generation resources are needed to meet AEL&P's winter load, the utility's marginal cost is projected to increase from 2.9 cents to 12.4 cents per kWh. To the extent that AEL&P can promote conservation in a shift away from firm electric heat prior to the need for a new generation resource, construction of that new resource can be delayed or possibly even avoided. Therefore, marketing of a full array of conservation measures and even methods to shift away from firm electric heat will be cost-effective during Phase 3. Our analysis showed that it would be cost- effective for AEL&P to begin this program at least 5 years before the projected need for a new generation resource. Conservation measures shown to be cost-effective for AEL&P to market during Phase 3 are summarized in Table S-2. These include measures aimed at a variety of uses: space heat, water heat, appliances, heating ventilation and air- conditioning systems, and lighting. Conservation measures that are cost-effective from a customer's perspective during Phase 3 would benefit the utility and its ratepayers by holding rates to a lower level than they would otherwise need to be over the long run. Many of the conservation measures in Table S-2 are upgrades from one level of insulation to another. Examples are the addition of floor insulation to improve heat resistance from R19 to R30, or replacement of single-pane windows with Table S-2 CONSERVATION MEASURES DESIGNED TO DELAY OR ELIMINATE NEW GENERATION RESOURCES AFTER CRATER LAKE Customer Utility Payback Benefit-Cost Sector End Use Measure (years) Ratio® New Single-Family and New Space heat Double- to triple-pane Multi-Family windows 3.6-3.9 1.2 Insulated doors 1.2 Roof R30 to R38 1.2 Floor R19 to R30 1.2 New Single-Family Space heat Heat pump in place of of forced air 1.2 1.2 Reduce infiltration plus heat exchanger 8.8 1.2 Existing single-family Space heat Ceiling RO to R19 0.5 1.2 R19 to R30 3.7 1.2 R30 to R38 7.6 1.2 Walls RO to Rll 1.5 1.2 Floor RO to R19 4.3 1.2 R19 to R30 7.7 1.2 Single- to triple- pane windows 6.3 1.2 Heat pump retrofit in Place of forced air 5.6 1.2 Existing Multi-Family Space heat Walls RO to Rll 1.6 1.2 Ceiling RO to R38 2.7 1.2 Floor RO to R38 4.3 1.2 Single- to double- pane windows 8.6 12 General Residential Water heat New tank with improved insulation and heat 2.0-3.4 1.2 traps Water heat Tank wrap and heat traps 1.0-1.6 1.1 Appliances Moderate- or high- efficiency refrigerator 1.0-2.3 1.1 Moderate- or high- efficiency freezer 1.0 1.1 Reduce hot water usage--clothes washer and dishwasher 2.1-3.1 1.1 Commercial Heating, Temperature Other ventila- Setback, 10° 0.2-0.4 1.5 tion, and air con- Wall Insulation RO 1.4 G@itioning to R13 3.9-4.7 (HVAC) Ceiling Insulation RO 1.4 to R30 3.3-3.9 Lighting Efficient lights 0.5 1.6 * transmission ané distribution marginal costs of $0.03 are reflected in these benefit-cost ratios. triple-pane windows in existing single-family houses. The cost of purchasing and installing these improvements went into the calculation of customer payback periods. For exam- ple, the 6.3-year payback for "single- to triple-pane windows" in existing single-family houses reflects the cost of replacing existing single-pane windows with new triple- pane windows. Other measures in Table S-2 are replacements of less effi- cient appliances with new, more efficient models. The pay- back periods for these measures are based on the assumption that the customer who buys one of these efficient appliances is in the market for that kind of appliance and will pur- chase one whether it is energy efficient or not. We then based the payback period for the purchase of an energy- efficient model on the difference in cost between an ordi- nary model and an efficient one. This cost difference rep- resents the customer's investment in energy conservation; therefore, the customer's payback period is the length of time it will take him or her to recover this cost difference through savings on electricity. For example, the 1.0-year payback for purchase of a moderate-efficiency freezer is based on the difference in cost between an ordinary freezer and one equipped with better insulation in the door and cabinet. Sometimes the payback periods in Table S-2 are given as a range. Usually, this range reflects the difference among the types of buildings where a conservation measure might be installed. For example, the 4.1- to 4.3-year payback period for insulated doors in new single-family and new multifamily housing reflects the fact that an insulated door will yield slightly greater overall energy savings, thus a shorter pay- back period, in a single- family house than in a multifamily building. The range in payback periods can also reflect differences in the type of measure a customer might choose. For example, the 1.0- to 2.3-year payback period for a moderate- or high- efficiency refrigerator reflects the difference in cost be- tween a moderate-efficiency refrigerator and a high- efficiency model, and the differences in energy savings between the two. These differences between moderate- and high-efficiency models were calculated for both frost-free and manual-defrost refrigerators, yielding payback periods of 1.0 year for a moderate-efficiency frost-free refrigera- tor, 1.4 years for a high-efficiency frost-free model, 1.8 years for a moderate-efficiency refrigerator that is manually frosted, and 2.3 years for a high-efficiency ma- chine with manual defrosting. Thus the range of 1.0 to 2.3 years listed in the table. sik SELECTION OF APPROPRIATE ENERGY CONSERVATION AND MANAGEMENT PROGRAMS We recommend that AEL&P's energy conservation and management program be based on an information and consumer education marketing campaign and a special incentive rate for dual- fuel service. As shown in Table S-2, AEL&P's benefit-cost ratio for con- servation measures during Phase 3 ranges from 1.1 to 1.6; the ratios for most measures are 1.2. The proximity of these benefit-cost ratios to 1.0 provides relatively little margin for the cost of creating and administering the con- servation program itself. Inclusion of these costs would decrease the benefit-cost ratios shown in Table S-2. For that reason, little if any funds could be paid to customers as conservation incentive payments without violating the no-losers test. Additionally, an incentive payment program could be more difficult to implement than an information-only campaign. However, if conditions change in the future such that AEL&P's marginal cost for generation increases significantly above 12.4 cents per kWh, we recommend that the utility re- consider an incentive payment program. Mandatory energy-efficiency standards are one way of promot- ing conservation in buildings. Regulations can be used, for example, to set minimum levels of wall and ceiling insula- tion. Such regulations are cost-effective but apply pri- marily to new construction. Therefore, regulatory programs are not effective in implementing conservation among exist- ing customers. Additionally, because AEL&P has no direct authority to implement or enforce regulations, its ability to implement regulatory programs is limited to the influence it may have with regulatory bodies such as the City and Borough of Juneau. Regulatory programs could serve as a backup to the informa- tion and dual-fuel rate programs. We recommend that AEL&P continue to lobby for municipal and state regulations that are cost-effective from the perspective of the customer, AEL&P, and society in general. ENERGY CONSERVATION AND MANAGEMENT MARKETING PLAN Under currently forecast conditions, financial incentive payments to customers are not cost-effective and conserva- tion regulations cannot be directly implemented. As men- tioned above, an information-based marketing approach will be the most cost-effective way to induce AEL&P's customers xiii to adopt dual-fuel service and conservation measures. Our plan for the dissemination of such information to customers addresses the following problem: many customers will not adopt cost-effective conservation measures, even if they will save money by doing so, unless they are adequately in- formed of (1) which measures are cost-effective, (2) how to install or adopt these measures, and (3) how these measures will yield financial and environmental benefits and will make customers' homes and offices more comfortable. As summarized in Table S-3, our conservation marketing plan sets forth ways of creating and disseminating information that will induce customers to adopt both dual-fuel service and conservation measures. The plan comprises seven steps, each appropriate for adoption during one or more of AEL&P's energy supply phases. When the utility enters a new plan- ning phase, it will be time for AEL&P staff to begin imple- menting the program steps suitable to that phase. The steps and their sequence were created to emphasize con- servation in particular sectors and for particular end uses. Step 4, for example, focuses on new-home buyers with three marketing activities designed to induce them to buy energy- efficient homes. This comprehensive approach, which ad- dresses homebuyers directly, as well as homebuilders and realtors, is more likely to succeed than a limited appeal just to homebuyers. The activities in Table S-3 were designed so that one full- time equivalent staff member can implement them. It will be necessary for AEL&P to monitor the program's performance, by convening randomly selected focus groups of customers and by conducting telephone surveys, to find out whether customers are deciding to adopt conservation measures on the basis of information provided by AEL&P's conservation program. AEL&P staff should also survey customers and analyze electrical billing data to determine how much energy has been saved through the conservation program. We recommend that AEL&P conduct its marketing program with in-house staff and the assistance of its program and media consultants. This approach will enhance AEL&P's in-house energy management expertise, giving the utility a good basis for future demand-side management activities. We believe that an information-only marketing campaign has a good chance for success in Juneau. Research has shown that a key element in the success of conservation programs is the character of the community in which they are implemented. Juneau has a small, relatively homogeneous population, many customers have a favorable attitude toward the utility, and Many customers know AEL&P's employees. The city also has a large number of home-owning, high-income, well-educated, do-it-yourself customers who are the most likely to install conservation measures. xiv Table S-3 RECOMMENDED MARKETING ACTIVITIES FOR AEL&P'S ENERGY CONSERVATION AND MANAGEMENT PROGRAM Program Step* 1. Startup Activities A. Emphasizing Dual- Fuel Service (Phases 1 and 2) Marketing Activity Organize dual-fuel task force to negotiate dual-fuel rate with Alaska Power Admini- stration, assess market potential for dual-fuel service, and obtain approval from Alaska Public Utilities Commission for permanent dual-fuel service. Complete a study of the potential market for the dual-fuel rate. Forecast the market penetration rate and nonfirm hydro- electric energy sales that will result from the dual-fuel rate. Estimate losses of firm electric sales that well results from conversion to dual-fuel heating by current electric heat customers. Develop simple, easy-to-recognize slogans and logos, emphasizing savings, for the overall conservation and dual-fuel pro- gram. Slogans and logos should be used on advertising, pamphlets, displays, and other promotional materials for dual-fuel and later conservation measures. To pre- vent confusion of dual-fuel program with overall program, the dual-fuel logo and slogan should be distinct from, but re- lated to, the overall program logo. Produce a limited number of media adver- tisements that: (1) emphasize AEL&P's concern about delaying construction of new power plants and reducing customer costs, (2) publicize dual-fuel heating as an alternative to oil heat, and (3) provide a contact for more information. Implement an employee communication pro- gram so that employees are informed about dual-fuel service and the reasons why AEL&P is interested in conservation. “the appropriate program phase when each step should begin is noted parenthetically after each step. xV 2. Program step* Implement Dual-Fuel-Service Marketing Campaign (Phase 2) Table S-3 (continued) Marketing Activity Contact furnace and boiler dealers. In- form them of pending dual-fuel rate and probable market for dual-fuel furnaces and boilers in new construction and as re- placement units in existing buildings. Solicit their ideas for cooperative ef- forts. Suggest such ideas as joint adver- tising, point-of-purchase displays, and AEL&P endorsement of dual-fuel furnaces and boilers. Prepare brochures for residential and com- mercial customers about dual-fuel rate and furnaces or boilers. Include information about cost of conversion to dual-fuel heating and the payback periods and sav- ings likely for Juneau participants. Establish an information hotline and clearinghouse. Hotline will be telephone number that customers can call for more information after they see an ad or bro- chure. Clearinghouse will be the location of program information at AEL&P. Contact and inform builders about the pending dual-fuel rate and benefits of dual-fuel heating. Establish dual-fuel rate. Working with furnace and boiler dealers, implement ideas for trade-ally coopera- tion solicited during Step 1. Provide dealers with brochures on dual-fuel ser- vice for their customers. Advertise rate through general media and point-of-purchase advertising. Dual-fuel task force to evaluate whether to send letter and brochure on dual-fuel service to residential and commercial cus- tomers who heat with oil or propane. Brochure would give AEL&P-specific infor- mation about the cost, savings, and pay- back periods for dual-fuel service. xvi Program Step* Startup Activities for Conservation to Reduce Use of Elec- tricity (Phase 3) Table S-3 (continued) Marketing Activity Produce a limited number of media adver- tisements that: (1) emphasize AEL&P's concern about delaying construction of new powerplants and reducing customer costs, (2) list the conservation measures AEL&P endorses, and (3) provide a contact for more information. Implement an employee communication pro- gram so that employees are informed about the conservation programs, measures, and services AEL&P offers and the reasons why AEL&P is interested in conservation. Send annual letter to customers listing their monthly energy consumption for the last 12 months. Contact trade allies. Inform them of con- servation measures. Solicit their ideas for cooperative efforts. Suggest such ideas as joint advertising, point-of- purchase displays, and AEL&P endorsement of products. Coordinate efforts to create comprehensive use of these information media. Address need for better service of heat pumps. Prepare or adopt from other utilities a series of pamphlets on weatherstripping, caulking, home insulation, weatherized windows, and general conservation tips. Include the average cost, electricity sav- ings, payback period, and dollar savings of these measures in Juneau. Develop an information booth that can be easily set up at community events. The information booth should be a method of distributing pamphlets and should be staffed by a person who is well informed about conservation measures. xvii Program Step* 4. New Construction” (Phase 3 and possibly earlier phases) 5. Water Heaters and Appliances (Phase 3 and possibly earlier phases) Table S-3 (continued) Marketing: Retiweey) fei es Develop a pamphlet on ways to reduce high heating costs and distribute it through hardware and lumber stores. Provide speakers on energy conservation to civic organizations and schools. Furnish speakers with promotional "giveaway" items, such as outlet insulators and re- frigerator magnets that carry program logo. Adopt recommended conservation measures in AEL&P buildings for future use as example of good conservation practices. Institute a new-home certification program in which new homes that include all con- servation measures that AEL&P thinks are desirable receive a certification from AEL&P. Concentrate on single-family homes initially. Design logo and brief name (e.g., Heatkeeper) for program. Distribute pamphlets about the meaning of an energy-efficient home through home- builders, realtors, and information booths at community events. Work with builders and local newspapers to print program logo and name in ad- vertisements for certified homes. Contact plumbers and other water heater dealers and installers and inform them of AEL&P's recommendations about energy- efficient and fossil-fuel water heaters. Pamphlets should be provided to these trade allies to give to their customers. Pohe new-construction program should begin with single-family housing be- cause it offers the best initial return on program investment. After about 1 year, the program probably can be extended to multifamily hous- ing when owners of such housing have seen the results of single-family programs and might see conservation as (1) an apartment marketing tool and (2) a good return on investment. xviii Table S-3 (continued) Program Step* Marketing Activity B. Develop an energy-efficient appliance program that consists of: (1) efforts to educate dealers about appliance effi- ciency and (2) distribution of pamphlets through dealers and booths at community events. 6. Existing Buildings A. Send a letter and pamphlet on how to re- (Phase 3) duce heating costs to residential cus- tomers with high winter heating bills. In letter give AEL&P-specific informa- tion about recommended conservation mea- sures, their cost, savings, and payback periods. Helping these customers reduce their bills will create good word-of- mouth publicity, the best form of advertising. B. Produce media advertisements that de- scribe recommended measures for existing buildings, give probable savings in Juneau for each measure in ad, and list phone number for more information. Ads should emphasize increased comfort that will result from improved insulation and less infiltration. Testimonials from local residents should also be useful. C. Contact insulation vendors and contrac- tors that do work on existing homes and inform them of AEL&P's recommendations about energy-efficient insulation lev- els. Pamphlets should be provided to vendors and contractors to give to their customers. D. Inform commercial HVAC and electrical contractors about AEL&P's recommenda- tions and provide with pamphlets to give to their customers. E. Institute a certification program for ex- isting homes that is modeled after new- home certification strategy in Step 3 above. Begin approximately 1 year after new-home program. xix Program step Table S-3 (continued) Marketing Activity me Commercial Audits (Phase 3) A. Hold residential and commercial workshops on how to install conservation measures in existing buildings. Contact vendors of commercial lighting equipment to develop joint promotional activities for energy-efficient lighting products (e.g., joint advertising). For example, AEL&P could provide informational pamphlets while the vendor provides pro- motional pricing. Offer commercial audits on a trial basis to the 50 largest commercial accounts. XX CONTENTS Page Preface iii Summary of Findings and Recommendations Vv Acknowledgments XXV 1 Introduction 1 a Program Goals 3 3 Market Analysis: System Loads, End-Uses, Costs, and Rates 9 System Loads 9 Projected System Marginal Costs 14 Projected Retail Rates 17 Forecast Implications 17 4 Program Benefit-Cost Analyses =a Analytical Approach ae Results of the Analysis 27 5 General Marketing Program Approach Si, Program Types 51 Results of the Analysis 52 6 Program Marketing Plan 55 Planning Framework BS Target Conservation Measures 57 Target Groups 58 Information Design 60 Design and Implementation of the Information Program 69 References 129 7 Program Objectives and Budget 85 Appendix Appendix Appendix Appendix Appendix Appendix Dual-Fuel and Conservation Marketing Objectives 85 Program Costs 86 A. Retail Sales Forecast Based on End-Use Patterns B. Conservation Measures Evaluated and Not Evaluated C. Benefit-Cost Analysis for Conservation Measures D. Energy Savings Versus Capital Cost for Conservation Measures E. Article from the Seattle Post-Intelligencer, January 12, 1987 F. Letter from Alaska Electric Light and Power Co. to Alaska Power Administration, July 8, 1986 xoCe TABLES 10 11 12 13 14 15 16 17 Page Energy Conservation and Management Program Goals and Strategies 5 Energy Conservation and Management Program Evaluation Criteria 6 Comparison of Juneau Energy Committee Goals With AEL&P's Energy Conservation and Management Plan 7 Forecast of AEL&P's Retail Sales, 1984-2000 10 Estimated Energy End-Use Patterns for AEL&P's Residential Customers, 1984 11 Estimated Energy End-Use Patterns for AEL&P's Commercial Customers, 1984 13 End Uses of Energy by Commercial Subsectors, 1984 14 Projected Electric Energy Requirements, Resources, and Marginal Generation Costs in Juneau, 1984-2000 16 Projected AEL&P Marginal Energy Costs, 1984-2000 17 Forecast of AEL&P's Retail Rates 18 Three Perspectives of Benefits and Costs Associated With Conservation Measures 24 Conservation Measures Designed to Displace Oil-Fired Generation in 1987 and 1988 29 Cost Comparison: New Residential Hydronic Heating System, With Oil-Fired Boiler, Versus Dual-Fuel System 35 Cost of Retrofitting Existing Residential Heating System to Dual-Fuel Systems 36 Energy Price Discounts Resulting From Differences Between Dual-Fuel Electric Rates and Fuel Oil Prices or Firm Electric Rates 37 Annual Savings From Energy Price Discounts for Dual-Fuel Electricity Compared to Fuel Oil 39 Annual Savings From Energy Price Discounts for Dual-Fuel Electricity Compared to Firm Electricity 39 xxiii 18 19 20 21 22 23 24 ao 26 Qi 28 Payback Periods for Dual-Fuel native Energy Price Discounts Conventional Fuel Oil Heating Payback Periods for Dual Fuel native Energy Price Discounts Conventional Firm-Electric Hea Payback Periods for Dual-Fuel Assuming A Dual-Fuel Rate of 2 Current Market Conditions Conservation Measures Designed to Delay or Eliminate New Generation Resources After Target Groups for Adoption of Page Investments at Alter- Relative to Costs for Systems Investments at Alter- Relative to Costs for ting Systems Heating Systems -0 Cents Per kWh and Crater Lake Conservation Measures Functions, Advantages, Disadvantages, and Best Uses of Various Marketing Appr Conservation Information Appro Appropriate Media for Juneau Recommended Marketing Activiti oaches aches and es for AEL&P's Energy Conservation and Management Program Dual-Fuel Marketing Objectives Energy Conservation Marketing Estimated Annual Cost of AEL&P's Energy Conservation and Management Program xxiv Objectives 41 42 44 47 Do) 62 63 70 88 89 90 ACKNOWLEDGMENTS This energy conservation and management plan was prepared under the joint guidance and direction of Alaska Electric Light and Power Company (AEL&P) management and Juneau Energy Advisory Committee. We gratefully acknowledge their impor- tant contributions to the analysis contained in this study. Members of AEL&P's management team directing this study included: Bill Corbus, General Manager David Stone, Customer Service Engineer Barbara Johnston, Assistant Customer Service Engineer The Juneau Energy Advisory Committee is appointed by the City and Borough of Juneau. Its members include the follow- ing individuals: Verdell Jackson, Chairman Dinah Van der Hyde, Vice-Chairman Art Chance Jim Douglas Kurt Dzinich Andrew Eggen Barbara Sheinberg Steve Shows Bob Speed David Stone Larry Woodall A task force was appointed by the Juneau Energy Advisory Committee to oversee and advise on the analysis conducted for the plan. The members of this task force were: Verdell Jackson Kurt Dzinich The plan was developed by CH2M HILL with technical assist- ance by Synergic Resources Corporation (SRC). The project team consisted of the following individuals: David Gray, CH2M HILL, Project Manager John Kounts, CH2M HILL, Marketing and Program Planner Laurel Andrews, SRC, Principal Economic Analyst Craig MacDonald, SRC, Senior Advisor Dan Pitzler, CH2M HILL, Economist Laura Tranin, CH2M HILL, Editor Betty Anderson, CH2M HILL, Editorial Assistant XXV Chapter 1 INTRODUCTION AEL&P's energy conservation and management plan was devel- oped in a series of separate tasks that resulted in deter- mination of program goals, identification of cost-effective conservation measures, and development of a marketing plan. The program was developed in collaboration with AEL&P man- agement and the Juneau Energy Advisory Committee. Eight tasks were accomplished as part of this study. These include: Le Determination of energy conservation and management program goals. ae Analysis and forecasts of system loads, end-use pat- terns, and costs. So Review of conservation programs and findings by other utilities. 4. Evaluation of conservation measures on AEL&P's system through benefit-cost analysis. Bs Assessment of general market approach. 65 Selection of program approach. Ts Response to comments by the Juneau Energy Advisory Committee. 8. Development of a marketing plan. Volume 1 to this report provides a description of our ana- lytical approach, summary of findings, and program descrip- tion. Volume 2 contains detailed reports for Tasks 2, 4, 6, and 8. Program planning began with determination of program goals. The utility's general planning goals were adopted, and stra- tegies and evaluation criteria were developed, in a joint meeting among AEL&P management, the Juneau Energy Advisory Committee, and the CH2M HILL consulting team. Once this was accomplished, an initial assessment of the market for con- servation was made. This included analysis of existing and projected system loads, end-use patterns, and costs. This assessment provided important inputs to the benefit-cost analysis of alternative conservation measures. Analysis was conducted from three different perspectives: the customer's perspective, the utility's perspective, and the perspective of society as a whole. On the basis of this analysis, four general conservation program types were evaluated. These included three programs for promotion of conservation mea- sures and a rate incentive program for promotion of dual- fuel service for space heating. General marketing programs analyzed included information, incentive (or subsidy pay- ment), and regulatory programs. On the basis of the benefit-cost analysis and the program evaluation criteria established as part of the goal setting, a general program approach for marketing cost-effective conservation and al- ternative fuel measures was selected. A specific energy conservation and management program was then developed that included plans for offering dual-fuel opportunities to AEL&P customers and marketing conservation measures. Chapter 2 PROGRAM GOALS AEL&P has three general goals an an electric utility: (1) to provide reliable and safe electric service, (2) to minimize the cost of electric service over the long run while maintaining financial integrity, and (3) to use electric resources efficiently. Development of an energy conservation and management program is one of many strategies AEL&P has undertaken to achieve these goals. The most obvious goal that an energy conservation and management program would help achieve is that of efficient resource use. In addition, AEL&P's program has been devised to re- duce the cost of electric energy in the long run. The three AEL&P general goals were adopted as goals for the energy conservation and management program. In a project planning meeting with utility management, the Juneau Energy Advisory Committee, and the consulting team, strategies for meeting these goals were developed. These strategies are outlined in Table 1. Many of these strategies provided direction for the planning process and are addressed as part of the resulting energy conservation and management plan. From these strategies, nine criteria were developed for evaluating alternative programs to be considered in the planning process. These criteria are outlined in Table 2. Program strategies and evaluation criteria are generally self-explanatory and straightforward. The one exception requiring further definition is the so-called "no-losers test" referred to in Table 1 as part of strategy 2c, and in Table 2 as part of evaluation criterion No. 2. The no-losers test relates to a question of a tradeoff be- tween economic efficiency and equity among customers. While some conservation programs are cost-effective for all con- cerned, others are cost-effective to society in general but increase cost to nonparticipants in the conservation pro- gram. The reason for this is that some conservation actions reduce the utility's revenues more than its costs (or revenue requirements). Since the utility's costs are recovered from all ratepayers, a program that reduces the utility's reve- nues by an amount greater than its costs has the effect of raising consumer rates above what they otherwise would have been. The "no-losers test" measures whether a conservation action results in rates being increased above what they otherwise would be. If a conservation action passes the no-losers test, then no consumer will be worse off because of the actions. Therefore, a conservation program that passes the no-losers test emphasizes an objective of economic efficiency constrained by equity among consumers. As stated by conservation experts Douglas Norlind and James Wolf, "the test protects those consumers who cannot take advantage of a utility conservation program by insuring that a conservation program may only be implemented as long as the average rates of the utility do not rise above what they would have been in the absence of a utility conservation program" (Ref. 2-1). In an initial scoping meeting for the AEL&P conservation plan, it was agreed by AEL&P management, the Juneau Energy Advisory Committee, and the consulting team that the conser- vation plan should be designed to meet the no-losers test. Once the goals, strategies, and evaluation criteria for the AEL&P conservation plan were developed, they were checked against the goals of the Juneau Energy Advisory Committee to be sure there were no conflicts before the goals, strate- gies, and evaluation criteria for the conservation plan were finalized. As shown in Table 3, the goals of the AEL&P con- servation plan compared favorably with the Juneau Energy Advisory Committee's goals. REFERENCES 2-1. Norlind, Douglas, and J. L. Wolf. Utility Conservation Programs: A Regulatory and Design Framework. Public Utilities Fortnightly. June 25, 1986. Table 1 ENERGY CONSERVATION AND MANAGEMENT PROGRAM GOALS AND STRATEGIES Provide reliable and safe electric service. a. When planning and implementing conservation programs, use the most reliable estimates of electricity savings and costs of conservation actions, within budget limitations. Monitor electricity conservation programs implemented to de- termine the reliability of the program in terms of actual electricity savings and participation rates. Minimize cost of electric service over the long run while maintain- ing financial integrity. a. e. Examine the costs and benefits to AEL&P of developing and implementing conservation programs to reduce average elec- tricity usage by AEL&P customers. Examine the financial impacts on AEL&P of implementing these conservation programs. Consider impacts of conservation programs on nonparticipants (i-e., does it violate the no-loser's test?) Reduce use of diesel fuel to generate electricity in the period prior to Crater Lake (about 3 years). Provide relief for all-electric customers. Use electric resources efficiently. a. Reduce use of kWh by customers at a cost per conserved kWh that is less than the cost of supplying an additional kWh through conventional generation. Defer the building of Dorothy Lake Dam. Encourage least-cost choice of fuels for each end-use and time period by AEL&P's customers (more specifically, encourage cost- effective electric energy use during hydro surpluses and dis- courage cost-ineffective use of diesel-generated electricity during hydro deficits). Encourage heat recovery and cogeneration. Table 2 ENERGY CONSERVATION AND MANAGEMENT PROGRAM EVALUATION CRITERIA Evaluation Criteria Diesel generation reduction and Dorothy Lake delay No-losers test Customer work contracts Relief for all-electric customers Least-cost choice of fuels Small financial impacts Small administrative costs Ability to implement Cost-effectiveness Definition Reduce use of diesel fuel to generate electricity in the period prior to Crater Lake hydroplant coming online and/or defer the building of Dorothy Lake dam. The no-losers test is passed if the nonparticipants are not adversely affected by the conservation program. The customer, rather than AEL&P, con- tracts for installation of conserva- tion measures or dual-fuel systems. Provide relief for all-electric cus- tomers in the form of lowered total cost of energy services. Encourage least-cost choice of fuels for each end use by AEL&P's customers (more specifically, encourage cost- effective electric energy use during surplus and discourage cost- ineffective use during deficits). The program does not require a sig- nificant financial commitment by AEL&P. The program has small administrative costs for AEL&P. The utility has the legal authority to implement the program. The program induces installation of cost-effective conservation measures. Table 3 COMPARISON OF JUNEAU ENERGY COMMITTEE GOALS WITH GOALS OF AEL&P'S ENERGY CONSERVATION AND MANAGEMENT PLAN Juneau Energy Committee Goals Maximize the use of renewable energy resources Maximize the use of local energy resources Avoid waste of all forms of energy re- gardless of source Keep energy dollars within the community Encourage energy use patterns that minimize utility investment Take advantage of Ju- neau's favorable ener- gy situation to expand job opportunities Increase public under- standing of how energy decisions affect indi- vidual consumer costs Expand the cost-of- service definition to include indirect costs Comparison with AEL&P Energy Conservation and Management Plan Consistent with Conservation Program (CP) Strategy 3b Consistent with CP Strategy 3b Consistent with CP Strate- gies 3a and 3b Consistent with CP Strate- gies 3a and 3b Primarily a load management strategy; also, consistent with CP Strategies 2a, 2b, and 2c Not directly a conservation goal; however, generally consistent with each conservation strategy To be addressed in con- servation marketing program Consistent with evaluating conservation investment versus marginal cost of other resources Chapter 3 MARKET ANALYSIS: SYSTEM LOADS, END-USES, COSTS, AND RATES After determination of program goals, development of the energy conservation and management plan required analysis of existing and projected market conditions. Such information was key to benefit-cost analysis and market strategy forma- tion. This market analysis included study of existing and projected system loads, end-use patterns, and costs. System load information was needed to determine four market fac- tors: (1) overall conservation potential, (2) timing of new resources that could be eliminated or postponed by conserva- tion, (3) future costs associated with new resource develop- ment (so-called marginal costs) that could be eliminated or postponed by conservation, and (4) retail rate projections. Study of end-use patterns was necessary to determine the major opportunities for conservation. Cost projections were necessary to allow the program to focus on least-cost re- source decisions. This was done in terms of benefit-cost analysis, where benefits were quantified in terms of costs eliminated or foregone by conservation, and costs were sim- ply those that resulted from the conservation measure. As described in Chapter 4, program benefits and costs are an- alyzed from several perspectives. Part of this analysis required projections of retail rates. SYSTEM LOADS LOAD FORECAST For this study, a forecast of future AEL&P loads was derived from load forecasting efforts by the U.S. Department of En- ergy, Alaska Power Administration (APA). The APA supplies most of Juneau's electric energy needs with wholesale energy from the Snettisham Hydroelectric Project. This project is currently being expanded with the development of a power supply from Crater Lake. As part of its planning process, APA routinely forecasts loads for the Juneau area. The APA's forecast published in its 1985 report, entitled "Up- date of Juneau Area Load Forecast" was the basis for the load forecast used in developing the AEL&P conservation plan. The APA medium forecast for the entire Borough of Juneau was adjusted to reflect only that portion served by AEL&P, which is just over 90 percent. The resulting forecast of AEL&P service-area loads is shown in Table 4. As the table shows, the Juneau economy is pro- jected to continue to grow over the long term with the total number of AEL&P customers increasing an average of 2.5 per- cent per year between 1984 and 2000. Over the same period, 1. Number of Customers Residential Class General Hot Water All Electric Commercial Class Small Commercial Large Commercial Industrial Total Customers Table 4 2. Annual Energy Use (kWh/Customer) General Hot Water All Electric Small Commercial Large Commercial Industrial 3. Annual kWh Use (kWh x 1,000) General Hot Water All Electric Small Commercial Large Commercial Industrial Total Sales FORECAST OF AEL&P'S RETAIL SALES, 1984-2000 Average Annual Increase 1984 _ 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 1984-2000 4,194 4,379 4,463 4,540 4,638 4,758 4,901 5,044 5,191 5,342 5,498 5,658 5,817 5,979 6,147 6,319 6,496 2.8% 1,987 2,115 2,145 2,164 2,183 2,203 2,223 2,245 2,266 2,288 2,310 2,332 2,356 2,379 2,403 2,427 2,451 1.3% 2,295 2,837 3,005 3,101 3,180 3,239 3,280 3,322 3,365 3,408 3,452 3,496 3,543 3,590 3,638 3,687 3,736 3.1% 1,404 1,294 1,327 1,360 1,396 1,431 1,468 1,506 1,544 1,584 1,625 1,667 1,710 1,754 1,799 1,845 1,892 1.9% 110 114 117 120 123 126 130 133 136 140 144 147 151 155 159 163 167 2.6% 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 2.5% 9,993 10,742 11,060 11,288 11,523 11,760 12,006 12,253 12,505 12,766 13,033 13,305 13,580 13,862 14,150 14,445 14,746 2.5% 6,584 6,791 6,786 6,771 6,767 6,750 6,740 6,711 6,683 6,654 6,626 6,598 6,560 6,522 6,484 6,447 6,409 0.2% 12,771 12,716 12,713 12,685 12,699 12,708 12,716 12,699 12,683 12,666 12,649 12,632 12,614 12,596 12,578 12,560 12,542 0.1% 20,623 20,355 20,341 20,330 20,317 20,311 20,279 20 ,606 20,938 21,276 21,619 20,099 20,047 19,995 19,942 19,890 19,838 0.2% 26,442 26,500 26,765 27,033 27,303 27,576 27,852 28,130 28,412 28,696 28,983 29,272 29,565 29,861 30,159 30,461 30,766 1.0% 595,255 600,000 606,000 612,060 618,181 624,362 630,606 636,912 643,281 649,714 656,211 662,993 669,401 676,095 682,856 689,685 696,581 1.0% 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 0.0% 27,613 29,738 30,287 30,744 31,385 32,117 33,032 33,850 34,689 35,548 36,429 37,332 38,155 38,996 39,856 40,734 41,633 2.6% 25,376 26,901 27,267 27,450 27,725 27,999 28,274 28,507 28,743 28,981 29,221 29,463 29,715 29,969 30,225 30,483 30,744 1.2% 47,330 57,737 61,122 63,044 64,599 65,789 66,521 68,461 70,457 72,512 74,627 70,272 71,024 71,785 72,553 73,330 74,115 2.8% 37,125 34,302 35,509 36,778 38,106 39,465 40,884 42,356 43,882 45,462 47,099 48,795 50,549 52,365 54,247 56,196 58,216 2.9% 65,478 68,603 71,019 73,555 76,212 78,930 81,768 84,713 87,763 90,924 94,198 97,590 101,097 104,730 108,494 112,393 116,432 3.7% 1,189 1,039 1,076 1,114 1,155 1,196 1,239 1,284 1,330 1,378 1,427 1,479 1,532 1,587 1,644 1,703 1,764 2.5% 204,111 218,319 226,280 232,685 239,181 245,495 251,717 259,171 266,864 274,805 283,002 284,931 292,072 299,432 307,019 314,840 322,904 2.9% Note: Data shown for 1984 are historical; data shown for 1985-2000 are projected. residential and small commercial customers are projected to decrease their average usage slightly (these projections are exclusive of a conservation program). Large commercial cus- tomers are expected to increase their average use, following the recent trend of larger businesses locating in Juneau. As a result of these factors, overall sales on AEL&P's sys- tem are projected to increase an average of nearly 3 percent per year between 1984 and 2000. This is a more rapid increase than AEL&P has experienced in 1985 and 1986. It is possible that loads will continue to remain relatively stable or decrease over a longer term. We have designed the conservation program in phases to allow AEL&P to adjust the program as necessary to respond to load and resource conditions as they change. END-USE PATTERNS Residential Major electricity end uses in the residential sector are, in order of size, space heat, water heat, appliances, and other. Estimates of these end uses for each of AEL&P's three resi- dential rate classes are shown in Table 5. These estimates are based primarily on data developed by Seattle City Light (SCL) for their residential customers and are adjusted to reflect conditions in Juneau. They therefore must be con- sidered order-of-magnitude estimates. Table 5 ESTIMATED ENERGY END-USE PATTERNS FOR AEL&P'S RESIDENTIAL CUSTOMERS, 1984 Energy Use in 1984 (kWh) All Electric, All Electric, General Hot Water Existing ; New* End Use (Rate 11) (Rate 12) (Rate 13) (Rate 13) Space Heat 573 2 7DLO 117,136 8,576" Water Heat -- 4,240 3,918 3,918 Appliances 4,240 4,240 3,918 3,918 Other ntnial LipittS 1,650 1,650 TOTAL 6,584 12,771 20,623 18,061 a ¥ : Assumes that new houses will be built to Juneau's Energy Code. el Table 5 includes a small space heat load for general and hot-water customers. This reflects the fact that supple- mental and portable electric space heaters are commonly used by these customers. Estimates shown in Table 5 reflect the fact that space and water heating are the major end uses of electricity in the residential sector and therefore present the greatest opportunities for conservation through insula- tion and other weatherization measures. For all-electric customers, electricity used for space and water heating is estimated to constitute nearly three-fourths of the average household's total electricity use. For the average residen- tial water heating customer (rate 12), space and water heat- ing constitute about one-half of total electricity use. It should be noted that Juneau's new energy building code, implemented in 1985, is estimated to reduce average space heating per household by over 20 percent from 11,136 kWh per year to 8,576 kWh per year. COMMERCIAL SECTOR End-use patterns in the commercial sector are much more dif- ficult to estimate than they are in the residential sector. This is because the commercial sector is much more hetero- geneous than the residential sector. Customers in the com- mercial class vary from small convenience stores, to super- markets, to large government office buildings. Consequently end uses in the commercial sector were estimated on the basis of usage per square foot of commercial floor space. In addition, commercial establishments were broken into five subsectors: (1) office; (2) retail; (3) education; (4) transportation, communication, and utilities; and (5) other. The general approach was to estimate the total floor space for each of these subsectors, and then estimate energy use per square foot in each of these subsectors. Estimates of floor space in each of the subsectors are shown in the last column of Table 6. These estimates were made on the basis of employment data and estimates of floor area per employee. Employment data were available from the Borough of Juneau, and estimates of floor area per employee were made on the basis of studies performed by Seattle City Light. Electric consumption by major end-use category was estimated as shown in the first four columns of Table 6. These data were derived by adjusting Seattle City Light data for con- ditions in Juneau. In addition, an estimate of the percent- age of commercial floor space heated with electricity was made on the basis of a survey of 31 commercial buildings in the AEL&P service area including 14 of the 15 largest cus- tomers. On the basis of this survey and other analyses, it was estimated that 25 percent of the commercial floor space 2 €T ESTIMATED ENERGY END-USE PATTERNS FOR AEL&P'S COMMERCIAL CUSTOMERS, Table 6 Energy Use in 1984 (kWh Per Square Foot of Floor Space) 1984 HVAC HVAC Total Total With Without With Without Electric Electric Electric Electric Floor Area Subsector Heat Heat Lights Other Heat Heat (square feet) Office 19.168 5.258 T.A13 2.840 29.121 15,211 2,744,769 Retail 11.051 5551 7.423 5.102 23.575 18.075 1,502,101 Education 15.587 0.939 3.817 3.909 23.313 8.665 943,795 Transportation, Communication and Utilities (TCU) 18.244 3.302 6.660 4.822 29.726 14.784 238,975 Other 10.698 2.540 6.660 2.983 20.341 12.183 325,931 aHVAC = Heating, ventilating, and air conditioning equipment. in the AEL&P service area is heated electrically. Because the sample size was too small to estimate the use of elec- tric heat by subsector, it was assumed that 25 percent of the floor area in each subsector is heated with electricity. On the basis of these estimates, total end use for each sub- sector was estimated as shown in Table 7. As this table shows, about one-half of the total commercial usage is esti- mated to be in commercial offices. Table 7 END USES OF ENERGY BY COMMERCIAL SUBSECTORS, 1984 Annual Energy Use Floor Space (£t? x_1,000) (kWh/ft”) With Without With Without Total Electric Electric Electric Electric Estimated Use Subsector Heat Heat Total Heat Heat (kWh x 1,000) Office 686 2,059 2,745 29 15 51,300 Retail 376 1,127 1,502 24 18 29,214 Education 236 708 944 23 9 11,637 Transportation, Communication, and Utilities 60 179 239 30 15 4,426 Other 81 244 325 20 12 4,622 Total 1,439 4,316 5,755 101,199 FORECAST END-USE PATTERNS On the basis of the residential and commercial end-use an- alysis described above, AEL&P's load forecast (Table 4) was broken down into end-use detail as shown in Appendix A. The detail of this forecast is limited by some simplifying as- sumptions including the assumption that 1984 energy-use pat- terns will remain constant throughout the forecast. PROJECTED SYSTEM MARGINAL COSTS AEL&P's cost to meet its last energy requirement for any period of time is called its marginal cost. Effectively, it is the cost associated with changes in its energy load: new load on AEL&P's system is delivered at AEL&P's marginal cost and energy conserved reduces the utility's cost by this mar- ginal amount. AEL&P's marginal energy cost is different in 14 — the winter than it is in the summer and is projected to change in the future depending on the need for new resources to meet new loads. The cost of energy that AEL&P and its wholesale supplier, APA, can generate at the margin (to meet load changes) with- out building new facilities is called Juneau's short-run marginal cost. When forecast energy requirements are such that new facilities must be built to meet new loads, costs associated with the new generation are called long-run mar- ginal costs. As discussed in Chapter 4, these cost estimates were impor- tant factors in determining the cost-effectiveness of spe- cific conservation measures from the standpoint of AEL&P and society in general. The marginal cost of new resources was compared to both the cost of specific conservation measures and the revenue that new load would generate for AEL&P. AEL&P's marginal generation costs were estimated on the basis of projected energy requirements and the resources anticipated to meet those requirements. These forecasts are shown in Table 8. The energy requirement forecast is taken from the APA's 1985 medium forecast of total requirements for the Juneau area and is consistent with the AEL&P sales forecast shown in Table 4. When the conservation analyses were conducted, AEL&P was projected to meet marginal winter loads with existing diesel generation until the Crater Lake hydroelectric project was completed in the fall of 1988 (see Table 8). So AEL&P's short-run marginal cost was projected to be equal primarily to the cost of fuel to run these facilities, or about 7.9 cents per kWh. As discussed later in this chapter, these conditions have now changed. Crater Lake will in- crease Juneau's overall firm energy generation capability by 45 percent. Once this hydroelectric project begins producing power in 1989, AEL&P's marginal cost is projected to decrease to 2.9 cents for generation, which assumes that APA will not raise its wholesale rate. Given the APA's medium load fore- cast, new generation is projected to be needed in 1995. At that time, the long-run marginal generation cost is projected to total 12.4 cents per kWh. These projections are in terms of 1985 price levels. That is, they have not been adjusted to reflect the prospect of future price inflation. In addition to generation costs, AEL&P must also incur costs to transmit and distribute energy generated at powerplants to the ultimate consumer. Long-run marginal transmission and distribution costs were estimated to be 3 cents per kWh during the winter and zero during the summer. The resulting forecast of AEL&P's total marginal cost per kWh is shown in Table 9. a 9T Table 8 PROJECTED ELECTRIC ENERGY REQUIREMENTS, RESOURCES, AND MARGINAL GENERATION COSTS IN JUNEAU, 1984-2000 6 Marginal a Energy Energy Resources (kWh x 10 ) Generation Cost Requiremepts Existing Crater Diesel or (¢/kWh) Year (kWh x 10 ) Hydro Lake Lake Dorothy Total Winter Summer 1984 249.3 228.0 - 213 249.3 Woo) 2.5 1985 265.6 234.0 a Sls6 265.6 7.9 736) 1986 2715.9 234.0 — 41.9 215.9) od) 2.9 1987 283.8 234.0 a 41.9 283.8 7.9 2.9 1988 291.6 234.0 -- 57.6 291.6 7.9 Ce) 1989 299-3 234.0 65.3 -- 299.3 2.9 2358) 1990 306.8 234.0 72.8 a 306.8 2.9 2.9 1991 314.5 234.0 80.5 ca 314.5 2.9 2.9 1992 322.4 234.0 88.4 -- 322.4 2.9 2.9 1993 330.4 234.0 96.4 - 330.4 2.9 2.9 1994 338.7 234.0 104.7 co 338o7 2.9 2.9 1995 347.2 234.0 105.0 8.2 347.2 12.4 3.2 1996 356.0 234.0 105.0 17.0 356.0 12.4 S34 1997 365.0 234.0 105.0 26.0 365.0 12.4 3.7 1998 374.2 234.0 105.0 3562 374.2 12.4 3.9 1999 383.7 234.0 105.0 44.7 383.7 12.4 4.2 2000 393.4 234.0 105.0 54.4 393.4 12.4 4.4 #1985 price levels. Source: Base data on loads and resources: Alaska Power Administration, Update of Juneau Area Load Forecast, May 1985. [ a 6 rf — Table 9 PROJECTED AEL&P MARGINAL ENERGY costs® 1984-2000 Marginal Cost ($/kWh) Year Winter Summer 1984 10.90 2.90 1985 10.90 2.90 1986 10.90 2.90 1987 10.90 2.90 1988 10.90 2.90 1989 5.90 2.90 1990 5.90 2.90 1991 5.90 2.90 1992 5.90 2.90 1993 5.90 260 1994 5.90 2.90 1995 15.40 3.20 1996 15.40 3.40 1997 15.40 3.170 1998 15.40 3.90 1999 15.40 4.20 2000 15.40 4.20 21985 price levels. PROJECTED RETAIL RATES Retail rate projections were also important factors for the cost-effectiveness analysis described in Chapter 4. Pro- jected rates when applied to estimated energy savings for a specific conservation measure provided an estimate of the measure's benefit to the customer and lost revenue to the utility. These projections, shown in Table 10, were based on analysis of AEL&P's embedded costs and the marginal cost projections shown in Table 9. As noted below, these projections are for study purposes only. Actual rate levels probably will vary from these forecasts. FORECAST IMPLICATIONS There are three important implications relating to the fore- casts used in this study. The first two relate to conclu- sions that can be drawn from the forecasts with regard to 7 8T Table 10 FORECAST OF AEL&P'S RETAIL RATES Energy Price (¢/kWh) Residential Small Large General Hot Water All Electric Commercial Commercial Industrial Year Winter Summer Winter Summer Winter Summer Winter Summer Winter Summer Winter Summer 1985 8.9 5.8 8.3 5.4 8.3 5.4 9.1 6.3 7.8 5.3 8.5 5.5 1986 9.7 6.2 9.0 5.8 9.0 5.8 9.9 6.7 8.5 5.7 952 Ce) 1987 9.9 6.2 9.3 5.8 9.3 5.8 10.1 6.7 8.8 5.7 9.5 5.9 1988 10.2 6.2 9.6 5.8 9.6 5.8 10.4 6.7 9.0 5.7 9.8 5.9 1989 7.9 6.2 7.6 6.0 7.8 6.1 6.5 6.4 6.2 5.2 7.4 5.9 1990 7.9 6.2 7.6 6.0 7.8 6.1 6.5 6.4 6.2 5.2 7.4 5.9 1991 7.9 6.2 7.6 6.0 7.8 6.1 6.5 6.4 6.2 5.2 7.4 5.9 1992 7.9 6.2 7.6 6.0 7.8 6.1 6.5 6.4 6.2 5.2 7.4 5.9 1993 7.9 6.2 7.6 6.0 7.8 6.1 6.5 6.4 6.2 5.2 7.4 5.9 1994 7.9 6.2 7.6 6.0 7.8 6.1 6.5 6.4 6.2 5.2 7.4 5.9 1995 8.4 6.2 8.1 6.0 8.3 6.1 7.0 6.4 6.8 5.2 7.9 5.9 1996 9.0 6.2 8.6 6.0 8.8 6.1 7.6 6.4 7.3 5.2 8.5 5.9 1997 9.4 6.2 9.1 6.0 9.3 6.1 8.1 6.4 7.8 5.2 9.0 5.9 1998 9.9 6.2 9.6 6.0 9.8 6.1 8.6 6.4 8.3 5.2 9.4 5.9 1999 10.4 6.2 10.1 6.0 10.3 6.1 9.0 6.4 8.8 5.2 9.9 5.9 2000 10.9 6.2 10.5 6.0 10.8 6.1 9.5 6.4 9.2 5.2 10.4 5.9 —_ = ; — ‘ rates among the various customer classes and the relation- ship between AEL&P's retail rates and its marginal cost. The third implication relates to the fact that these fore- casts are used as a basis for formulating conservation plans. As conditions change from those forecast, it is important that conservation plans change to reflect the new conditions. PROJECTED RATE SPREAD The "rate spread," or the difference in rates paid by the various AEL&P customer classes, is projected to be relative- ly small. Therefore, generally speaking, a conservation measure that produces the same energy savings for all users, such as an energy-efficient appliance, will have the same level of cost-effectiveness for each customer class. How- ever, since building types and customer behavior patterns differ significantly between the residential and commercial sectors, separate conservation assessments were conducted for most conservation measures in these sectors, as dis- cussed in Chapter 4. For the residential sector, the all-electric rate was se- lected for use in the benefit-cost analysis since most con- servation measures evaluated related to space heating. Nonetheless, conclusions reached by applying the projected all-electric rate to water heating and other electric uses apply equally to customers in the general and water heating residential classes, since the projected rates for these classes are nearly the same as for the all-electric class. For the commercial sector, the large commercial rate was used for benefit-cost analysis. Again, because of the simi- larity between rate projections for the large and small com- mercial classes, conclusions reached through use of the large commercial rate forecast apply to the commercial sec- tor as a whole. PROJECTED MARGINAL COST VERSUS RETAIL RATES Though under study conditions AEL&P's marginal cost per kWh exceeds its retail rates in 1987 and 1988, starting in 1989 AEL&P's marginal cost is projected to be substantially less than its projected retail rates. As discussed above, with the advent of power from Crater Lake, AEL&P's marginal gen- eration cost will be 2.9 cents per kWh. Adding an estimated long-run cost for transmission and distribution brings the total winter marginal cost to 5.9 center per kWh. During this period AEL&P's winter retail rates are projected to range from 6.2 to 7.9 cents per kWh. So during the period of hydroelectric surplus brought about by the addition of power from Crater Lake, AEL&P's retail rates per kWh will be up to 5 cents higher than its marginal generation cost and 19 2 cents higher than its total marginal cost including long- run transmission and distribution costs. Under these circumstances alone, it would be in AEL&P's self interest to sell more energy rather than promote conserva- tion. However, under the projections used for this study, Juneau energy requirements will require additional new gen- eration resources during winter periods starting in 1995. At that point, AEL&P's marginal cost will again exceed its retail rates. So, to the extent that AEL&P can implement conservation, it can delay or eliminate the next required generation facility after Crater Lake. AEL&P can thereby delay or avoid returning to conditions where its marginal cost exceeds its retail rates. CHANGES IN STUDY CONDITIONS As noted above, this energy conservation and management plan was developed on the basis of projected assumptions about the future. As conditions change from those forecast, it is important that the energy conservation and management pro- gram be adjusted to reflect those changes. Such changes could be as simple as a change in the projection of when Juneau's next new generating resource will be needed after Crater Lake, or as substantial as the sale of APA to private owners, an event that would result in a complete restructur- ing of wholesale rates to AEL&P from the Snettisham and Crater Lake projects. Market conditions projected in this study rely heavily on load and resource projections made by the APA in its 1985 report entitled "Update of Juneau Area Load Forecast." Since 1985, conditions have changed from those included in the APA forecast in two significant ways. First, the Juneau economy has fallen into a recession. As a result, the long- term trend of significant annual increases in energy re- quirements ended in 1986 with energy requirements actually decreasing by about 4 percent. Second, hydrologic condi- tions in the Juneau area have been such that there is sub- stantial runoff during the winter of 1986-1987. As a result, a greater-than-average supply of power will probably be available from the Snettisham project. The combination of reduced loads and relatively abundant hydroelectric avail- ability has led power supply managers to project that diesel generation will not be needed during the winter of 1986-1987. The same possibility exists for the winter of 1987-1988. Under these conditions, AEL&P's marginal cost would remain lower than retail rates at least until load growth requires that new generation facilities be constructed. This assumes that APA's pricing policy remains intact. 20 If the Juneau economy recovers from the current recession and resumes its long-term growth trend, this study's longer- term forecasts of electric energy loads, resource needs, and costs remain valid for conservation planning purposes. If loads grow more slowly than projected, it will delay the need for new resources and the associated dramatic increase in AEL&P's marginal cost. Under these conditions it would likely be prudent to delay at least part of the implementa- tion of a conservation marketing program. If the economy does not return to its long-term growth trend or if for some other reason AEL&P's loads decline or remain relatively constant in the future, AEL&P's marginal cost of energy would remain relatively low and the need for imple- menting conservation measures for reduced usage would be greatly diminished. By the same token, under these circum- stances APA might choose to increase its wholesale rate in order to recover revenues it anticipated from higher sales. As a result, the need for conservation might be replaced by the need for increased sales to diminish APA's need for in- creased rates. Adjustments to AEL&P's conservation plan in reaction to such a scenario are beyond the scope of this report. 21 ae Chapter 4 PROGRAM BENEFIT-COST ANALYSES Each measure proposed for AEL&P's energy conservation and management program was analyzed for its costs and benefits. This includes traditional conservation measures for reduced consumption through heightened efficiency, and dual-fuel measures designed to conserve energy through use of surplus hydroelectricity that would otherwise be wasted. This chapter contains a description of the approach used in this analysis and the results of the benefit-cost analysis. ANALYTICAL APPROACH Analysis of the benefits and cost of specific conservation and management measures on the AEL&P system proceeded in five general steps. First, an analytical framework was established so that the benefit-cost analysis would provide adequate information to meet the goals and strategies as outlined in Table 1. In particular, the extensive benefit- cost analysis required to conduct the "no-losers test" was performed. Second, a phasing framework was established to evaluate the need for changes in the energy conservation and management program as conditions change in the future. Third, specific conservation measures were identified for evaluation. Fourth, data on efficiencies gained and the costs associated with each conservation measure were devel- oped. Fifth, benefit-cost analyses were conducted for each measure under the analytical framework developed in the first and second steps. ANALYTICAL FRAMEWORK TO MEET PROGRAM GOALS Implicit in the adopted energy conservation and management program goals (Chapter 2) is that the conservation measures promoted by the utility be cost-effective to the customer, to the utility, and to society in general. Measures that are cost-effective from these three perspectives pass the "no-losers test" discussed in Chapter 2. Accordingly, the analysis of conservation measures was conducted from these three perspectives. The basis for benefit-cost analysis from each of these three perspectives is summarized in Table 11. For more detailed discussion, see the Task 4 re- port in Volume 2. 23 Table 11 THREE PERSPECTIVES OF BENEFITS AND COSTS ASSOCIATED WITH CONSERVATION MEASURES LS Society's perspective Benefits: Electricity saved, valued at marginal costs Costs: Capital cost plus operation and maintenance (O&M) costs 2. Customer's perspective Benefits: Electricity saved, valued at rates Costs: Capital cost plus O&M costs Eg Utility's perspective Benefits: Electricity saved, valued at marginal costs (value of delaying new plants or not operating existing plants) Costs: Electricity saved, valued at rates PHASED PROGRAMS TO REFLECT PROJECTED CHANGES IN POWER SUPPLY CONDITIONS As discussed in Chapter 3, AEL&P's marginal costs were pro- jected to be higher than its retail rates in the immediate, short-term period of 1987 and 1988 and then were projected to decrease to a level significantly below retail rates for the intermediate period until 1995, when they would increase again to a higher level than retail rates. These projec- tions implied that AEL&P's conservation program should have three general phases: ° Phase 1 would last from 1987 through 1988. During this period, it was projected that conservation would save the utility and its ratepayers the high cost of diesel generation. ° Phase 2 would start in the fall of 1988. During this period, AEL&P would have surplus energy avail- able from Crater Lake for resale to its customers. The utility could make temporary interruptible sales of this surplus energy available to its cus- tomers at relatively low cost. Phase 2 would end when surplus energy was no longer available. 24 wa ° Phase 3 would start several years before the next generation resource would be projected to be nec- essary. During this period, conservation would cause the delay or avoidance of the next generat- ing resource and the high marginal cost associated witht. There would be some overlap between Phases 2 and 3. Given the projections shown in Chapter 3, Phase 3 would begin in about 1990. Accordingly, the benefit-cost analysis was conducted from three time perspectives to correspond with the three general phases. Conservation measures were evaluated from 1987 and 1993 time perspectives to correspond with Phases 1 and 3, respectively. A dual-fuel program to facilitate temporary, interruptible sales was evaluated from a 1989 time perspec- tive to correspond with Phase 2. As discussed in Chapter 3, it now appears that AEL&P marginal energy cost for 1987 and probably 1988 will be substantially lower than original projections. These changed conditions appear to eliminate the need for an aggressive conservation campaign in Phase 1. As described further in this chapter and in Chapter 6, under these changed conditions, AEL&P should focus its attention on Phases 2 and 3. IDENTIFICATION OF CONSERVATION MEASURES Specific conservation measures for evaluation as part of AEL&P's conservation plan were identified in a meeting with AEL&P management, representatives of the Juneau Energy Advi- sory Committee, and members of the CH2M HILL consulting team. Measures identified for both the residential and com- mercial sectors are listed in Table B-1 of Appendix B. In addition to these conservation measures, dual-fuel strate- gies for Phase 2 and fuel-switching strategies for Phase 3 were identified. These are discussed in more detail below. Information on some identified conservation measures was not available from the sources discussed below, so these meas- ures were not evaluated as part of this study. These meas- ures are listed in Table B-2 of Appendix B. DEVELOPMENT OF CONSERVATION MEASURE EFFECTIVENESS AND COST DATA Information on the effectiveness and cost of the specific conservation measures applicable to AEL&P customers was ob- tained from local sources, other utilities, and secondary 1ohe 1993 perspective was chosen to represent the average perspective during the 1990-1995 time frame. 25 sources. Adjustments were made to the data when necessary to better reflect Juneau weather conditions and price levels. The estimates are general in nature. Actual costs and ener- gy savings for specific applications depend on the specific building's structural characteristics, customers' lifestyles and associated energy usage patterns, and possibly other factors. Thus, it is important to understand that data pre- sented in this report simply indicate the general cost- effectiveness of specific conservation measures. Further analysis is warranted for specific applications. Detail on data sources consulted and adjustments made to these data are provided in the Task 4 report included in Volume 2. BENEFIT-COST ANALYSIS The overall cost-effectiveness of conservation measures listed in Table B-1 of Appendix B was evaluated through benefit-cost analysis. As mentioned above, these analyses were separately conducted from the perspective of the cus- tomer, AEL&P, and society as a whole. In addition, program measures were evaluated from three time perspectives. Con- servation measures were evaluated from short- and long-term implementation perspectives. Dual-fuel systems were evalu- ated from an intermediate perspective. As mentioned above, with recently changed conditions in Juneau's short-term load-resource balance, the focus of the benefit-cost analy- sis is assumed to shift to the intermediate and longer term perspectives. The benefit-cost analysis accounted for benefits and costs associated with a conservation measure from its initial in- stallation through the end of its useful life. During these periods, which ranged between 3 and 30 years depending on the measure, costs and benefits often varied from year to year. For example, from a customer's perspective, the cost of most conservation measures is in the first year alone and the benefit changes from year to year, as the value of ener- gy saved varies with the energy rate charged by AEL&P. From the utility's perspective, the measure's cost in terms of reduced revenues from the customer varies from year to year and equals the savings to the customer. The utility's ben- efit also varies from year to year depending on its avoided cost for wholesale energy. Through use of present-value analysis, our benefit-cost an- alysis accounted for the "time value" implicit in these ben- efit and cost stream variations. Present-value analysis is explained with an energy conservation example in Appendix B of the Task 4 report in Volume 2. The detailed benefit-cost analysis provides data on payback periods, net present val- ues, benefit-cost ratios, and internal rate of return. Ex- cept for the payback period calculations, these parameters 26 are each calculated through present value analysis. Much of the data presented in Appendix C to this volume and in Vol- ume 2 are based on present value analysis. For the lay reader, the results are simplified for presenta- tion in this chapter: only two parameters are reported-- simple payback from the customer's perspective and the benefit-cost ratio from the utility's perspective. The customer payback is defined as the ratio of capital cost to first-year savings resulting from installing a measure. That is, the payback period is simply the projected number of years it would take for the customer's cost for the con- servation measure to be equaled in resultant reductions in energy costs. The shorter the payback the more favorable the investment. Payback is the measure of cost-effectiveness most typically employed by customers who contemplate conser- vation investments. Although the customer payback period is reported in this chapter because of its general use by cus- tomers, net present value analysis was used to determine overall cost-effectiveness, as discussed in Volume 2. The benefit-cost ratio is the ratio of the present value of benefits to the present value of costs. If benefits equal costs, the ratio equals 1.0. A ratio of greater than 1.0 implies that a measure is cost-effective because the bene- fits exceed costs; a ratio of less than 1.0 implies that a measure is not cost-effective because benefits are less than costs. As was shown in Table 11, the utility benefit-cost ratio for our analysis in this volume shows the ratio of the value of benefits (in terms of utility costs avoided through conservation) versus the costs to the utility (in terms of foregone utility revenues through reduced sales). If the utility benefit-cost ratio exceeds 1.0 for a conservation measure, then the associated costs to the utility in terms of lost sales are less than the cost would have been to meet the sales with the next available generation resource. The main difference between the two ratios is that the cust- omer payback ratio reflects the cost-effectiveness of the conservation measure from the customer's perspective, while the utility benefit-cost ratio simply shows the benefit-cost ratio of any long-term reduction in energy growth on AEL&P's system, regardless of the cost to the customer who chooses to install the conservation measure. RESULTS OF THE ANALYSIS Results of the benefit-cost analysis are presented in this section. These results are presented in terms of the three general program phases described above. 27 PHASE 1. CONSERVATION MEASURES FOR THE IMMEDIATE FUTURE Analysis Assuming Continued Hydroelectric Deficits and Load Growth Detailed benefit-cost analyses were conducted for conserva- tion measures installed in 1987. These analyses were made under study assumptions of continued load growth and hydro- electric deficits through 1988. Results of these analyses are summarized in Table 12. Measures found to be cost- effective from the perspective of the customer, the utility, and society were all oriented primarily to reduced winter electricity usage in order to displace oil-fired generation. In the analysis of 1987 conservation investments, some con- servation measures were found to be cost-effective from the customer's perspective but not from AEL&P's perspective. Since they therefore failed the "no-losers test," they were not included in Table 12. However, as discussed below, they are documented in Appendix C. In program planning meetings, members of the Juneau energy committee requested a listing of all conservation measures found to be cost-effective from the customer's perspective. Such lists are provided in Appendix C from perspectives of potential conservation investments in 1987 and 1993. The 1987 analysis was for potential conservation investments in Phase 1 and the 1993 analysis represented potential invest- ments in Phase 3 of AEL&P's conservation program. In addi- tion, data on the capital cost and projected energy savings for each conservation measure evaluated in this study can be found in Appendix D. Analysis of Changed Conditions Consideration of results shown in Table 12 should be made with the understanding that load and power supply conditions have changed since these analyses were completed. AEL&P loniy conservation measures relating primarily to reduced winter usage (i.e., space heating measures) were found cost-effective from the utility's perspective in 1987 since they were projected to primarily displace oil-fired gen- eration. Measures that reduce energy use on a year-round basis were found to not be cost-effective to the utility because of lost revenue during the summer periods when AEL&P's marginal cost was projected to be relatively small. For example, water heater blankets and heat traps were found to have a payback period of less than 1 year for the customer, but a negative net present value for the utility. Since such measures were not cost-effective to AEL&P, they failed the no-losers test and were not included in Table 12. 28 Table 12 CONSERVATION MEASURES DESIGNED TO DISPLACE OIL-FIRED GENERATION IN 1987 AND 1988 Customer Utility Payback Benefit-Cost Sector End Use Measure years) Ratio" New Single-Family and Space heat Double- to triple- 3.1-3.4 1.1 New Multifamily pane windows Insulated doors 3.6-3.8 Leo Roof R30 to R38, 3.4-6.9 1.1 Floor R19 to R30 7539757 1.1 New Single-Family Space heat Heat pump in place 1.0 1.1 of forced air Existing Single-Family Space heat Ceiling RO to R19 0.5 ded: R19 to R30 3.2 1.1 R30 to R38 6.7 1.1 Walls RO to Rll 1.3 1.1 Floor RO to R19 3.8 Led R19 to R30 6.8 ded Single- to triple- 5.5 1.1 pane windows Heat pump retrofit 4.9 1.1 in place of forced air Existing Multifamily Space heat Walls RO to R11 1.4 1.1 Ceiling RO to R38 2.3 1.1 Floor RO to R38 ide? 1.1 Commercial Heating, Temperature 0.2-0.3 Led Office ventilation, Setback, 10° Retail and air Other conditioning Wall Insulation 2.9°3.5 1.2 (HVAC) to R13 Ceiling Insulation 2.4-2.9 1.2 to R30 a Transmission and distribution marginal costs of $0.03 are reflected in these benefit-cost ratios. 29 currently faces the following conditions: the critical need for conservation to displace oil-fired generation has been eliminated for 1987 and may also be eliminated or substan- tially diminished for 1988. System loads are decreasing (sales decreased by 4 percent in 1986) and could, continue to decline with the state economy in 1987 and 1988. The util- ity's marginal energy cost is now less than its retail rates, rather than greater as originally projected. There is a prospect that APA may increase its wholesale rate to AEL&P for Snettisham and Crater Lake energy if sales are not as high as those that were originally projected and used to justify the construction of the Crater Lake project. For these reasons, the focus of the conservation program has shifted to Phases 2 and 3--marketing of hydroelectric sur- pluses beginning in 1989 followed by promotion of conser- vation to delay or eliminate the need for a new generating resource beyond that provided by Crater Lake. Under these conditions, we recommend that the first phase of AEL&P's conservation program be limited to initial, startup activities to establish the program for Phases 2 and 3. This could include development of staff expertise in conser- vation measures and dual-fuel systems, improvement of the energy efficiency in AEL&P's own buildings, and preparation of promotional materials for Phases 2 and 3. Development of staff expertise is essential for answering customer questions thoroughly and consistently. If some initial conservation marketing is desired in Phase 1 for public relations purposes, it could focus on conserva- tion measures that would be lost if not acted upon when they are available. These opportunities primarily present them- selves with new construction. The opportunity for relative- ly low-cost energy efficiencies can be taken advantage of during construction. After a building is complete, retro- fits for some conservation measures are substantially more expensive. New construction measures shown to be cost- effective in 1987 under criteria developed for AEL&P's con- servation plan are included in Table 12. However, before proceeding with a new-construction conservation campaign in Phase 1, we recommend that AEL&P review the new construction market, with projections of the current recession continuing through Phase 1 and possibly beyond, new construction might be very limited and therefore few opportunities for market- ing conservation to this target group might develop in Phase 1. Under such circumstances, it would not be cost- effective to begin the campaign in Phase 1. larLeP's load reduction has been associated with an economic recession in Alaska and Juneau. As reported in Appendix E, Alaska economists generally forecast that further reduc- tions in economic activity are likely and the recession could therefore last several more years. 30 PHASE 2. DUAL-FUEL MEASURES STARTING IN WINTER 1988-89 Background Once the Crater Lake project is complete in the fall of 1988, Juneau will have a substantial hydroelectricity sur- plus. At that time, the major objective of AEL&P's conser- vation plan will be to make efficient use of this surplus energy, which would otherwise be lost when water available for hydroelectric generation is released in reservoir overflows. As noted in Chapter 2, AEL&P's marginal cost of energy shifts dramatically depending on whether Juneau faces a hydroelectric surplus or deficit. Currently, when hydro- electricity is in deficit, marginal generation costs are about 7.9 cents per kWh for fuel and other operating costs, and over 10 cents per kWh if the long-run costs of new gen- erating capacity are considered. When there is a surplus of hydroelectricity, AEL&P's marginal cost for generation pur- chased from APA is 2.9 cents per kWh. AEL&P's policy has been to encourage customers not to use electric heat during years when there is a hydroelectricity deficit. This is because fuel could be used more effici- ently when burned directly for heating rather than for elec- tric generation. Additionally, the high marginal cost for oil-fired generation creates the need for AEL&P to raise rates. The surplus of hydroelectricity that will exist during Phase 2 of the conservation plan will give AEL&P and APA an incentive to increase energy sales, but once the surplus is used to serve firm loads, new loads will have to be met with high-cost new energy resources. For this reason, it would be in the interest of AEL&P and its ratepayers to find temp- orary new markets for the surpluses. These temporary sales could then be interrupted when the energy is needed to meet firm loads. One market AEL&P has identified to meet this objective is service to dual-fuel heating systems. A dual-fuel heating system is one that can use either electricity or another form of energy as its sole source of heat for a sustained period, and can comfortably and uniformily heat each occu- pied room of a home or commercial building. If an oil furnace is used as part of a dual-fuel system, its heat dis- tribution system should have zone control to ensure that each room can be heated evenly and comfortably for the long periods when surplus hydroelectricity for heating might be unavailable. AEL&P has established a permanent, dual-fuel class of ser- vice for large commercial customers and an experimental SH dual-fuel class of service for residential and small com- mercial customers. Electric energy is available at reduced rates to these customers when supply from APA is surplus and AEL&P has the capacity to supply service to the customer. Supply is interrupted during periods of hydroelectric de- ficits and capacity shortages. The interruption is limited exclusively to the dual-fuel heating system; service to all other electrical appliances and equipment is continued. There are three overall benefits that accrue to AEL&P from dual-fuel service: 1a Conservation of electricity during periods of hydro- electric deficits. Dual-fuel customers must heat with an alternate energy source when hydroelectricity is in deficit and marginal loads are met with oil-fired generation. Ais Conservation of fuel oil and use of electric resources that would otherwise be wasted during periods of sur- plus hydroelectricity. are Peak-load reduction to improve system load factor, con- serve capacity, and provide overall load management. Analysis As described above, the major goal of Phase 2 of AEL&P's conservation plan is to use surplus hydroelectricity that would otherwise be lost. In the sense that energy is saved from being wasted, it is conserved. It is equally important that use of the energy surplus be accomplished in a cost- effective manner. Dual-fuel service was evaluated as a means to accomplish these goals. Separate cost analyses were conducted for new residential construction and retrofitted dual-fuel systems. Benefits were evaluated in terms of saved energy costs re- sulting from the discount for dual-fuel electricity. Given the uncertainty of both future fuel oil prices and the interruptible wholesale power rate that is currently being negotiated with APA, benefits were analyzed under a range of possible future conditions. The results of the benefit-cost analysis are presented primarily from the customer's perspective. From the utility's perspective, the dual-fuel program will only be cost-effective during Phase 2 if interruptible energy is successfully marketed to consumers who otherwise would heat with fuel oil, and if firm electric heat custom- ers (that is, those with no intention of shifting to oil- only heat) are not induced to shift to dual-fuel service. A shift by electrically heated customers from firm to 32 interruptible sales will not increase the use of surplus energy, but will result in a substantial reduction in AEL&P revenues. These revenue reductions would be significantly higher than reductions in AEL&P costs and would result in the need for a rate increase. Such a scenario would fail the no-losers test. It appears that a large shift from firm electric heat to dual-fuel heat is not economical with one possible excep- tion. As discussed below, if dual-fuel systems are loosely defined to include oil or propane heaters without zone con- trol, shifts from firm to dual-fuel service could prove fea- sible for some customers. However, if AEL&P offers dual-fuel service only for heating systems that fully meet the criteria for a dual-fuel heating system as discussed under "Background," above, such shifts would be prevented since systems without zone control would not qualify for dual-fuel service. Nevertheless, firm electric heat customers may begin convert- ing from firm electric heat to dual-fuel or fuel-oil-only heating systems for reasons other than financial savings. Under these conditions we recommend that AEL&P consider lowering the rate for firm electric heat in the winter and offset the decrease by raising rates in the summer. Beyond this strategy, if customers are still intent on converting to oil heating systems, AEL&P may want to persuade them to install dual-fuel systems instead. As will be discussed below, a shift of firm electric heat customers to dual-fuel or alternate heating systems will be cost-effective from the utility's perspective in Phase 3. A significant marketing challenge will be to induce firm elec- tric heating customers not to shift to dual fuel or other heating systems during Phase 2, but to encourage them to do so in Phase 3. Dual-Fuel Costs: New Construction. In Juneau, new con- struction typically includes either an electric or a fuel- oil heating system. Under current market conditions, if an electric system is installed, it is typically baseboard re- sistance heat because of the low installation costs of about $1,500. If a forced-air or hydronic system is in- stalled, it is typically a fuel-oil system because the ef- fective cost of fuel oil is less than one-half that of electricity. Since a hydronic or forced-air dual-fuel system cannot eco- nomically be installed with resistance heat, it was concluded that the market for dual-fuel systems in new construction rests with contractors and consumers who would otherwise install an oil-fired system. We therefore limited our new construction cost analysis to a comparison between dual-fuel and standard fuel-oil heating systems. 33 As shown in Table 13, the analysis identified the cost pre- mium associated with different dual-fuel systems in compari- son with an oil-fired system consisting of a boiler and hydronic distribution system. The new construction analysis and the retrofit analysis, discussed below, were performed both excluding and including costs for dual-fuel hardware (separate meter, contacts, and load management switch). Whether these load management hardware costs are paid by the customer or the utility, they are costs that must be offset by the benefit of a discounted rate for surplus, interruptible energy from APA. Although separate analyses were not conducted for the commercial sec- tor, results shown for the residential sector are generally applicable to the small commercial sector both for new con- struction and retrofits. Costs are somewhat higher for the large commercial sector. As shown in Table 13, a dual-fuel, forced-air system has roughly the same cost as a hydronic system with an oil boiler. Therefore, to the extent that a forced air system is an ac- ceptable substitute to consumers who would otherwise invest in a hydronic system, there is high potential for marketing dual-fuel, forced-air systems in new residential construction. Adding an electric boiler or an electric resistance system to an oil-fueled boiler and hydronic heating system adds $1,500 to $2,000 to the investment cost of a new home. Dual-Fuel Costs: Retrofits in Existing Buildings. Costs to retrofit existing heating systems to dual-fuel capability are shown in Table 14. Unlike new construction, it is pos- sible that both fuel-oil and electric heating systems might be retrofit for dual-fuel capability. The cost to retrofit an electric system is generally higher. As shown in Table 14, the least costly dual-fuel retrofit involves a forced-air oil furnace. Adding an electric heater in the plenum or ducts of a forced-air system costs about $600, assuming that an upgrade to the building's electric service panel is not required. The next least expensive retrofit is adding an electric boiler to an existing oil- fired boiler in a hydronic system. Again, assuming no up- grade in the building's electric service panel is required, the cost of this retrofit is estimated to be about $1,500. Most electric heat on AEL&P!s system is in the form of re- sistance baseboard systems. The cost of retrofitting an An estimated 85 to 90 percent of all-electric customers have resistance heat. 34 Table 13 COST COMPARISON: NEW RESIDENTIAL HYDRONIC HEATING SYSTEM, WITH OIL-FIRED BOILER, VERSUS DUAL-FUEL SYSTEM Premium for Dual-Fuel System ($) Installed Excluding Including Cost Load Mgmt. Load Mgmt. Heating System ($) Hardware Hardware Space Heating Systems, Excluding Domestic Hot Water: Oil-fired boiler, 5,000 -- -- hydronic system Oil/electric dual- 5,000 -- 500 fuel forced-air system Oil-fired boiler, 7,000 2,000 2,500 hydronic, plus electric resistance system Space Heating Systems, Including Domestic Hot Water: Oil-fired boiler, 6,000 -- -- hydronic system Oil-fired boiler, 7,500 1,500 2,000 plus electric boiler, hydronic system Source: Alaska Electric Light and Power Company. 35 Table 14 COST OF RETROFITTING EXISTING RESIDENTIAL HEATING SYSTEM TO DUAL-FUEL SYSTEMS Installed Cost ($) Excluding Including Load Mgmt. Load Mgmt. Retrofits Hardware Hardware Existing Fuel Oil Systems: Add Electric Heater in Plenum or Ducts of Forced-Air System: No electric service upgrade 600 1,100 Electric service upgrade required 1,600 2,100 Add Electric Boiler to Oil Boiler in Hydronic System: No electric service upgrade 1,500 2,000 Electric service upgrade required 2,500 3,000 Existing Electric Heat Systems: Add Propane Wall Units (2 units) 2,000 2,500 or Stand Alone Oil Burners Add Oil Forced-Air Furnace to Electric Forced-Air System 277500) 3,000 Add Oil Boiler to Electric Boiler in Hydronic System 4,000 4,500 Add Oil-Fired Hydronic or Forced- Air System to Resistance Heating System 9,000 9,500 Source: Alaska Electric Light and Power Company. 36 electric baseboard heating system to include fuel-oil heat- ing appears to be prohibitively expensive at nearly $10,000. Creating dual-fuel capability by adding propane wall units or stand-alone fuel burners to a home with electric resis- tance heat is relatively inexpensive at about $2,000. How- ever, if dual-fuel service is available only for heating systems with zone control in each room, low-cost propane wall units and stand-alone fuel burners would not qualify for the dual-fuel rate. ; As discussed above, it is in AEL&P's interest not to lose firm electric sales in Phase 2. We therefore recommend that AEL&P study the heating market in more detail to be sure that a market shift from firm electric heating systems to dual-fuel systems with electricity and propane wall units or even fuel-oil systems is not likely. This recommendation is discussed in more detail below. Dual-Fuel Benefits. For a customer to benefit economically from adding dual-fuel capability to his or her oil-fired system, there must be an effectively lower energy price for the dual-fuel electricity. Table 15 shows the effective energy price discount that results when alternative dual- fuel retail rates are compared to retail fuel oil prices and AEL&P's firm electric rates. TABLE 15 ENERGY PRICE DISCOUNTS RESULTING FROM DIFFERENCES BETWEEN DUAL-FUEL ELECTRIC RATES AND FUEL OIL PRICES OR FIRM ELECTRIC RATES Energy Price "Discounts" Equivalent for Given Dual-Fuel Rate Energy Price (¢/kWh) Energy Price (¢/kWh) 2.0 205. 30) em5 Fuel Oil: = $0.75 per gallon 60% efficiency Siscls ie: 0.6 On -0.4 80% efficiency Zio O23) -0.2 -0.7 Le $1.00 per gallon 60% efficiency 4.1 2.1 1.6 te 0.6 80% efficiency Sieh aboal 0.6 (Ral -0.4 $1.25 per gallon 60% efficiency EyGal Sel) 2.6 rent 1.6 80% efficiency 328 1.8 1.3 0.8 0.3 Firm Electricity 768 558) Ses 4.8 4.3 Sh The effective oil prices shown are based on two efficiency . levels. On a seasonal basis, most oil-fired systems in Juneau probably operate at an efficiency of around 60 per- cent. However, there is often a perception that oil-fired heating systems are as high as 80 percent efficient. Effec- tive energy price comparisons were performed using both efficiency levels. For example, at $0.75 per gallon, fuel oil is equivalent to 3.1 cents per kWh, assuming a 60 per- cent efficiency in the oil heating system, and 2.3 cents per kWh assuming 80 percent efficiency in the oil heating system. The effective discounts in energy prices for dual-fuel ser- vice are also shown in Table 15. Effective discounts are shown for dual-fuel rates that range from 2.0 to 3.5 cents per kWh. For example, at $1.00 per gallon, a retail rate of 2.5 cents would provide an effective energy price discount of 0.6 to 1.6 cents per kWh. This analysis shows that, with current fuel oil prices in Juneau reaching as low as $0.79 per gallon, the retail rate for dual-fuel service may need to be 2.0 cents or lower to present an attractive discount to consumers who would otherwise heat with fuel oil. Table 15 also shows the effective electric rate discount for alternative dual-fuel rates compared with the projected firm residential retail rate of 7.8 cents per kWh (see Table 10). The effective energy price discount compared to this firm electricity rate is much higher than the effective price discount compared to fuel oil prices. For example, at $1.00 per gallon and a 60 percent efficiency factor for burning fuel oil, the effective energy price discount for dual-fuel prices ranging from 2.0 to 3.5 cents per kWh ranges from 0.6 to 2.1 cents per kWh. In contrast, for the same range of dual-fuel prices, the effective dual-fuel dis- count compared to the price of firm electricity ranges from 4.3 to 5.8 cents per kWh. Annual savings from effective energy price discounts for dual-fuel electricity compared to fuel oil are shown in Table 16. As this table shows, higher annual savings accrue to customers with higher annual heating requirements. For example, with an effective energy price discount of 1.0 cent per kWh, a customer with annual heating requirements of 5,000 kWh would save $50 by using dual-fuel electricity rather than fuel oil, while a customer with annual heating requirements of 20,000 kWh would save $200 per year. 38 Table 16 ANNUAL SAVINGS FROM ENERGY PRICE DISCOUNTS FOR DUAL-FUEL ELECTRICITY COMPARED TO FUEL OIL Annual Heating Annual Savings for Given Price Discounts Requirements 1.0 cents 1.5 cents 2.0 cents 2.5 cents 3.0 cents (kWh) per kWh per kWh _per kWh per kwh per kWh 5,000 $50 $75 $100 $125 $150 10,000 100 150 200 250 300 15,000 150 i225 300 375) 450 20,000 200 300 400 500 600 Annual savings from energy price discounts for dual-fuel electricity compared to firm electricity are shown in Table 17. The range of effective discounts shown in this table are higher than the range shown in Table 16 because, as discussed above, the effective energy price discount for dual-fuel service is higher when compared to firm electric-— ity rates than when compared to fuel oil prices. Table 17 ANNUAL SAVINGS FROM ENERGY PRICE DISCOUNTS FOR DUAL-FUEL ELECTRICITY COMPARED TO FIRM ELECTRICITY Annual Heating Annual Savings for Given Price Discounts Requirements 4.0 cents 4.5 cents 5.0 cents 5.5 cents 6.0 cents (kWh) per kWh per kWh per kWh per kWh per kWh 5,000 $200 $225 $250 $275 $300 10,000 400 450 500 550 600 15,000 600 675 750 825 900 20,000 800 900 1,000 1,100 1,200 Benefit of an Interruptible Rate from APA. APA's current rate for energy delivered to AEL&P is 2.9 cents per kWh. Including AEL&P's cost-of-power adjustment charge, AEL&P's effective retail rate for dual-fuel service is 3.5 cents per kWh. As shown in Table 15, instead of a discount, this price equates to a premium, compared to a price of fuel oil of between $0.75 and about $1.00 per gallon. For this reason, AEL&P has proposed to APA, and APA is con- sidering, a reduced rate for interruptible, dual-fuel ser- vice. The details of AEL&P's initial proposal are included 39 in its July 8, 1986, letter to the APA (see Appendix F). In that letter, AEL&P proposes a variable wholesale rate. The rate would be 1.75 cents per kWh when Juneau fuel oil prices are $1.00 per gallon, and would vary so that for each per- centage point difference between the price of fuel oil in Juneau and the base price of $1.00 per gallon, APA's rate would be adjusted by the same percentage (to a maximum rate of 2.5 cents per kWh). For example, under conditions when the price of fuel oil is $0.75 per gallon, or 25 percent lower than the $1.00 base price, the APA rate would be 1.31 cents per kWh or 25 percent lower than the base rate of 1.75 cents per kWh. AEL&P would add 0.75 cent for system losses and AEL&P's other costs, so that, with fuel oil prices at $0.75 per gallon, the total retail rate for dual- fuel service would be 2.06 cents per kWh. As shown in Table 15, this would provide an effective energy price dis- count of about 0.3 to 1.1 cents per kWh compared to the effective fuel oil price. It may be that in order to effec- tively market dual-fuel service to consumers with fuel-oil heating systems, a lower wholesale rate for interruptible power will need to be negotiated. Customer Payback Periods: General Analysis. Payback periods for dual-fuel investments, assuming various effective energy price discounts, are shown in Tables 18 and 19. Table 18 is oriented to consumers who would otherwise heat with standard fuel-oil systems in either new construction or existing buildings. Table 19 is oriented to existing electric heat customers. The range of effective energy price discounts for dual-fuel service shown in Tables 18 and 19 correspond to those shown in Tables 16 and 17, respectively. Obviously, the lower the investment in a dual-fuel system, the faster the payback period. Also, customers with a larger heating demand will receive a faster payback because their annual cost savings will be higher. For example, with a $1,000 investment in a dual-fuel system and annual heating requirements of 5,000 kWh, the payback period is 20 years. With the same investment and annual heating requirements of 20,000 kWh, the payback period is 5 years. Customer Payback Periods: Current Conditions. Customer payback periods under current market conditions in Juneau are shown in Table 20. This analysis assumes that a retail rate of 2.0 cents per kWh would be offered under these mar- ket conditions. As the table shows, the effective energy price discount for this dual-fuel rate is 1.5 cents per kWh relative to the price of fuel oil and 6.0 cents per kWh rel- ative to the price of firm electricity. Under these conditions, investment in a dual-fuel system appears cost-effective for some consumers. For those who would otherwise heat with fuel oil, dual-fuel investments 40 Te Table 18 PAYBACK PERIODS FOR DUAL-FUEL INVESTMENTS AT ALTERNATIVE ENERGY PRICE DISCOUNTS RELATIVE TO COSTS FOR CONVENTIONAL FUEL-OIL HEATING SYSTEMS Dual-Fuel Investment Payback Period at Given Price Discounts (years) Costs, Annual Heating 1.0 cents 1.5 cents 2.0 cents 2.5 cents 3.0 cents Requirement per kWh per kWh per kWh per kWh per kWh $500 5,000 kWh 10.0 6.7 5.0 4.0 Seo 10,000 kWh 5.0 Sis 2705) Zi) to 15,000 kWh aS 22 7, TES. Lent, 20,000 kWh 205) iors Las 1.0 0.8 $1,000 5,000 kWh 20.0 SiS) 10.0 8:10 6.7 10,000 kWh 10.0 6rd 5.0 4.0 SS 15,000 kWh 607 4.4 a3 iad, ree 20,000 kWh 51.0 360 25) 260) ed $1,500 5,000 kWh 30.0 20.0 US <0 1210) 10.0 10,000 kWh 1520 10.0 woD 6.0 52.0 15,000 kWh 10.0 6.7 Sr10 4.0 S13 20,000 kWh 15 570) a0) Lig!) 25 $2,000 5,000 kWh 40.0 26.7 20.0 16.0 Ses 10,000 kWh 20.0 ie yc) 10.0 8.0 6.7 15,000 kWh 1373 8.9 6.7 Seo 4.4 20,000 kWh 10.0 6.7 Bo!) 4.0 B63 $2,500 5,000 kWh 500 S360 2570 2070 Gren? 10,000 kWh 25710 16.7 TABS) 10.0 8.3 15,000 kWh Gren?) ee Sirs Gra 516 20,000 kWh A 8.3 Gras 5.0) 4.2 cv Table 19 PAYBACK PERIODS FOR DUAL-FUEL INVESTMENTS AT ALTERNATIVE ENERGY PRICE DISCOUNTS RELATIVE TO COSTS FOR CONVENTIONAL FIRM-ELECTRIC HEATING SYSTEMS Dual-Fuel Investment Payback Period at Given Price Discounts (years) Cost, Annual Heating 4.0 cents 4.5 cents 5.0 cents 5.5 cents 6.0 cents Requirement _per kWh _per kwh _per kWh per kWh per kWh $2,000 5,000 kWh 10.0 8.9 8.0 vas 6.7 10,000 kWh 5.0 4.4 4.0 3.6 3.3 15,000 kWh gua 3.0 2ni7 2.4 Zale 20,000 kWh 2.15) 2,2 2.0 1.8 Ta \ $2,500 5,000 kWh i2s5 diwl 10.0 9.1 8.3 10,000 kWh 6.3 5.6 5.0 4.5 4.2 15,000 kWh 4.2 a7, 3/3) 3.0 2.8 20,000 kWh oh 2.6 2.5 253 2.1 $3,000 5,000 kWh 15.0 13/3 12.0 10.9 10.0 10,000 kWh 75 6.7 6.0 5.5 5.0 15,000 kWh 5.0 4.4 4.0 3.6 Jal) 20,000 kWh 3.8 2.0 3.0 Ziel 7 2.5 $3,500 5,000 kWh 17.55 15.6 14.0 12.7 ae 10,000 kWh 8.8 7.8 He O 6.4 5.8 15,000 kWh 5.8 oka 4.7 4.2 3.9 20,000 kWh 4.4 ane Jao 352 2.9 cv Table 19 (Continued) Dual-Fuel Investment Payback Period at Given Price Discounts (years) Cost, Annual Heating 4.0 cents 4.5 cents 5.0 cents 5.5 cents 6.0 cents Requirement _per kWh _per kWh _per kWh per kWh per kWh $4,000 5,000 kWh 20.0 17.8 16.0 té. > 13.3 10,000 kWh 10.0 8.9 8.0 Fl 6.7 15,000 kWh O1si7 59 SS 4.8 4.4 20,000 kWh 5.0 4.4 4.0 3).16 353 $4,500 5,000 kWh Zeid 20.0 18.0 16.4 pe 10,000 kWh Ds 10.0 9.0 8.2 iso 15,000 kWh 735) G.7 6.0 aeo 5.0 20,000 kWh 5.6 5)..0 4.5 al 3.8 $7,500 5,000 kWh 3705 3303 30.0 271.3 25.0 10,000 kWh 18.8 Leu? 25.0 ano L255 15,000 kWh 1285 tid 10.0 9.1 8.3 20,000 kWh 9.4 8.3 75 6.8 6.3 $10,000 5,000 kWh 50.0 44.4 40.0 36.4 33.3 10,000 kWh 25.0 22,2 20.0 18.2 NG 7, 15,000 kWh Louw 14.8 SiS a2 eae 20,000 kWh 12.5 oth aese 10.0 Sid. 8.3 Table 20 PAYBACK PERIODS FOR DUAL-FUEL HEATING SYSTEMS ASSUMING A DUAL-FUEL RATE OF 2.0 CENTS PER kWh AND CURRENT MARKET CONDITIONS Assumptions Dual-Fuel Rate: 2.0 cents per kWh Standard Energy Prices Fuel oil: 85 cents per gallon Firm electricity: 8.0 cents per kWh Effective Dual-Fuel Energy Price Discount Compared to: Fuel oil: 1.5 cents per kWh Firm electricity: 6.0 cents per kWh Customer Payback Period Payback Period for Given Annual Heating Requirements (years) 5,000 10,000 15,000 20,000 Dual-Fuel Action, Cost kWh kWh kwh kWh Add Electric System to Fuel Oil System $ 500 (Retrofit forced-air system)?! 6.7 3.3 Zea 1.7 $ 1,000 13.3 6.7 4.4 3.3 $ 1,500 (Add electric potter) 2”? 20.0 10.0 6.7 5.0 $ 2,000 26.7 13.3 8.9 6.7 $ 2,500 33.3 16.7 11.1 8.3 Add Fuel Oil or Propane to Electric System $ 2,000 (Add 2 propane wall units)* 6.7 3.3 2.2 1.7 $ 2,500 (Retrofit forced-air system)* 8.3 4.2 2.8 7 $ 3,000 10.0 5.0 3.3 2.5 $ 3,500 11.7 5.8 3.9 2.9 $ 4,000 (Retrofit with electric boiler)* 12.3 6.7 4.4 3-3 $ 4,500 15.0 7.5 5.0 3.8 $ 7,500 25.0 12.5 8.3 6.3 $10,000 (Add oil forced air or boiler system to baseboard system)~ 33.3 16.7 111 8.3 * Example of specific investment. Excludes required investment of $500 for load manage- ment hardware. Assumes that no upgrade in electric service panel is required. 44 requiring $500 or less are generally cost-effective for me- dium to large customers. Investments of up to $1,500 are generally cost-effective for larger customers. Beyond $1,500, the customer payback appears to be either marginal or in- feasible for most residential customers who would otherwise heat with fuel oil. Larger investments would likely be fea- sible for large commercial customers, however. Therefore, it appears the dual-fuel marketing campaign should focus on the following three market sectors: is New residential and small commercial construction: ° Customers who are considering oil-fired, forced-air systems ° Larger customers who are considering oil-fired hydronic heating systems as Residential and small commercial retrofits of oil-fired system ° Customers with forced-air systems ° Larger customers with oil boilers whose electric service can be expanded to include an electric boiler without an upgrade of the electric service panel ae Large commercial customers with oil heating systems It also appears that, under current conditions and a dual- fuel rate of 2.0 cents per kWh, investment in a dual-fuel system will be cost-effective to a portion of the firm elec- tric heat market. Propane wall units would provide rela- tively fast paybacks to those medium- and large-residential customers who could accept heat from such units as a substi- tute for electric heat. For larger residential and small commercial customers, good paybacks appear to be possible for investments of up to about $4,500. It therefore appears that it would be cost-effective for these types of customers to add fuel-oil capability to electric forced-air furnaces and possibly electric boilers. As shown in the last line of Table 20, a $10,000 retrofit to upgrade an electric-resistance heating system for dual-fuel capability with fuel oil ap- pears to be infeasible. As mentioned above, we recommend that AEL&P devote more mar- ket research to existing electric heat customers to estimate the potential losses of firm electric sales to dual-fuel service during Phase 2 of the conservation plan. This re- search should extend to all major service classes: residen- tial, small commercial, and large commercial. Particular 45 attention should be paid to the potential for adding propane units or free-standing, radiating oil burners to create dual-fuel capability with electric baseboard heat. As dis- cussed above, such conversions could be prevented by offer- ing dual-fuel rate only for heating systems that fully meet the criteria for dual-fuel capability with zone control. If the firm electric market losses appear to be high relative to gains from the fuel oil market, the dual-fuel program should be delayed to Phase 3 of the conservation plan. PHASE 3. CONSERVATION MEASURES TO DELAY OR AVOID NEW GEN- ERATION REQUIREMENTS AFTER THE ADDITION OF CRATER LAKE As discussed above, Crater Lake's addition of low-cost hydroelectric energy would be followed by relatively high- cost new generation to meet long-term projected load growth. At the point that new generating resources are needed to meet AEL&P's winter load, AEL&P's marginal generating cost is projected to increase from 2.9 cents to 12.4 cents per kWh, and its total marginal cost is projected to increase from 5.9 to 15.4 cents per kWh. To the extent that AEL&P can promote conservation and a shift away from firm electric heat prior to the need for a new generation resource, construction of that new resource can be delayed or possibly even avoided. Such a delay would help maintain lower rates than would otherwise be required. A new generation resource after Crater Lake was originally projected to be required starting in 1995 (see Table 8). However, with the recent downturn in the Juneau economy, reduction in AEL&P loads, and projections for a continued recession, it now appears that a new generation resource will likely not be required until sometime after 1995. Once use of Crater Lake generation has begun to meet firm loads and loads are forecast to grow, AEL&P should begin Phase 3 of its conservation program: the marketing of a full array of conservation measures and shifts away from firm electric heat. Our analyses show that it would be cost-effective for AEL&P to begin its program many years before the projected need for a new generation resource without conservation. Conservation Measures Conservation measures shown to be cost-effective under the criteria developed for this study are summarized in Table 21. These include measures aimed at a variety of end uses: space heat; water heat; appliances; heating, ventilating, and air-conditioning systems; and street lighting. Essen- tially, any conservation measure that is cost-effective from a customer's perspective would benefit the utility and its 46 Table 21 CONSERVATION MEASURES DESIGNED TO DELAY OR ELIMINATE NEW GENERATION RESOURCES AFTER CRATER LAKE Customer Utility Payback Benefit-Cost Sector End Use Measure fyears) Ratio New Single-Family and New Space heat Double- to triple-pane Multi-Family windows 3.6-3.9 1.2 Insulated doors 4.1-4.3 1.2 Roof R30 to R38 3.8-7.8 1.2 Floor R19 to R30 8.3-8.8 1.2 New Single-Family Space heat Heat pump in place of of forced air 1.1 1.2 Reduce infiltration plus heat exchanger 8.8 1.2 Existing single-family Space heat Ceiling RO to R19 0.5 1.2 R19 to R30 3.7 1.2 R30 to R38 7.6 1.2 Walls RO to Rll 1.5 1.2 Floor RO to R19 4.3 1.2 R19 to R30 7.7 1.2 Single- to triple- pane windows 6.3 1.2 Heat pump retrofit in place of forced air 5.6 1.2 Existing Multi-Family Space heat Walls RO to Rll 1.6 1.2 Ceiling RO to R38 2.7 1.2 Floor RO to R38 4.3 1.2 Single- to double- pane windows 8.6 1.2 General Residential Water heat New tank with improved tank insulation and 2.0-3.4 1.2 heat traps Water heat Tank wrap and heat traps 1.0°1.6 1.1 Appliances Moderate- or high- efficiency refrigerator 1.0-2.3 1.1 Moderate- or high- efficiency freezer 1.0 1.1 Reduce hot water usage--clothes washer and dishwasher 2.1-3.1 1.1 Commercial Heating, Temperature Other ventila- Setback, 10° 0.2-0.4 1.5 tion, and air con- Wall Insulation RO to 3.9-4.7 1.4 ditioning R13 (HVAC) Ceiling Insulation RO 3.3-3.9 1.4 to R30 Lighting Efficient lights 0.5 126 “transmission and distribution marginal costs of $0.03 are reflected in these benefit-cost ratios. 47 ratepayers by holding rates to a lower level than they would otherwise need to be over the long run. Many of the conservation measures in Table 21 are upgrades from one level of insulation to another. Examples are the addition of floor insulation to improve heat resistance from R19 to R30, or replacement of single-pane windows with triple-pane windows in existing single-family houses. The cost of purchasing and installing these improvements went into the calculation of customer payback periods. For exam- ple, the 6.3-year payback for "single- to triple-pane win- dows" in existing single-family houses reflects the cost of replacing existing single-pane windows with new triple-pane windows. Other measures in Table 21 are replacements of less effi- cient appliances with new, more efficient models. The pay- back periods for these measures are based on the assumption that the customer who buys one of these efficient appliances is in the market for that kind of appliance and will pur- chase one whether it is energy efficient or not. We then based the payback period for the purchase of an energy- efficient model on the difference in cost between an ordi- nary model and an efficient one. This cost difference represents the customer's investment in energy conservation; therefore the customer's payback period is the length of time it will take him or her to recover this cost difference through savings on electricity. For example, the 1.0-year payback for purchase of a moderate-efficiency freezer is based on the difference in cost between an ordinary freezer and one equipped with better insulation in the door and cabinet. Sometimes the payback periods in Table 21 are given as a range. Usually this range reflects the differences among the types of buildings where a conservation measure might be installed. For example, the 4.1- to 4.3-year payback period for insulated doors in new single-family and new multi- family housing reflects the fact that an insulated door will yield slightly greater overall energy savings, thus payback period, in a single-family house than in a multi-family building. The range in payback periods can also reflect differences in the type of measure a customer might choose. For example, the 1.0- to 2.3-year payback period for a moderate- or high-efficiency refrigerator reflects the difference in cost between a moderate-efficiency refrigerator and a high- efficiency model, and the differences in energy savings be- tween the two. These differences between moderate- and high-efficiency models were calculated for both frost-free and manual defrost refrigerators, yielding payback periods 48 of 1.0 year for a moderate-efficiency frost-free refrigera- tor, 1.4 years for a high-efficiency frost-free model, 1.8 years for a moderate-efficiency refrigerator that is manually defrosted, and 2.3 years for a high-efficiency ma- chine with manual defrosting. Thus the range of 1.0 to 2.3 years listed in the table. It should be noted that the utility's benefit-cost ratio for conservation measures in Phase 3 ranges from 1.1 to 1.6 with the ratios for most measures being 1.2. The reason for this is that AEL&P rates are forecast to be higher than the util- ity's marginal costs during the initial years of Phase 3 and then lower than marginal costs in subsequent years. As noted in Chapter 5, the proximity of these benefit-cost ratios to 1.0 provides relatively little margin for the cost of the conservation program itself. Adding the cost of the program to the calculations decreases the benefit-cost ratio. Lit- tle, if any, funds could be paid as conservation incentives without violating the no-losers test. Shifts Away from Firm Electric Heat A program to encourage customers to shift away from firm electric heat will need to be marketed carefully. Sales of electricity for firm electric heat load during Phase 2 will benefit AEL&P by using surplus hydroelectricity and provid- ing important revenues to the utility. However, as the Crater Lake resource begins to be highly used and AEL&P faces high costs for the next generating resource, the rela- tive benefit of firm electric heat load will decrease sub- stantially to the point that its benefit-cost ratio will be less than 1.0. Under these circumstances, it would be to AEL&P's advantage to conserve its firm resources by encour- aging customers to replace firm electric heat service with interruptible dual-fuel service, if some non-firm hydroelec- tric energy were available, or a totally different energy source such as fuel oil or propane. It would also be to the utility's advantage to encourage nonelectric heating systems in new buildings. Retrofit to Interruptible Dual Fuel. As noted in the dis- cussion of Phase 2 in this chapter, the cost of retrofitting an existing resistance electric-heating system for dual-fuel capability with hydronic or forced-air fuel-oil systems is prohibitively expensive. A small portion of the residential heating market has other electric heating systems. In this sector, feasible retrofits to dual-fuel systems with fuel oil are limited to relatively large customers. Therefore, the primary market for a shift from firm-electricity to dual- fuel will likely be commercial customers. As mentioned in the discussion of Phase 2, a more detailed assessment of the commercial electric heating market should be conducted to assess its potential for dual-fuel conversion. 49 Retrofit to Fossil Fuel Heating Systems. For most buildings, it would probably be more expensive to replace an electric space-heating system than it would be to install a dual-fuel system. For that reason, in Phase 3 AEL&P should market dual-fuel systems instead of electric-heat replacements. However, there are other opportunities for shifting from firm electric use to alternative energy forms during Phase 3. Those identified in this study include: conversion of water- heating systems from electric to oil or propane systems, and the addition of supplementary space-heating systems (that would not qualify as part of a dual-fuel system). Two methods of converting away from electric water heating were considered. The first was for those existing oil hydronic heating systems that originally also provided do- mestic hot water but were retrofitted to have an electric water heater. The second was replacement of worn-out elec- tric water heaters with propane water heaters. Results of this second analysis also apply to purchases of new water heaters for new construction. As detailed in the Task 4 report included in Volume 2, both methods for converting away from electric heat were shown to be cost-effective in Phase 3. Supplementary space-heating systems that do not qualify as creating dual-fuel capability were also identified as poten- tial strategies for load reduction in Phase 3. These in- clude heating with wood stoves, portable kerosene heaters, and possibly propane wall units. Except for the propane wall units, the cost-effectiveness of these measures was not studied. As mentioned above, it appears that the extent that propane space heaters are acceptable as a heat source, they are cost-effective. After further market investiga- tion, it may be found that propane systems are generally not acceptable in the market as primary heating sources in dual- fuel systems, but are acceptable as supplementary heating sources. Under such circumstances, it would be cost- effective for AEL&P to promote installation of these units in Phase 3. 50 Chapter 5 GENERAL MARKETING APPROACH In Chapter 4, energy conservation and management methods designed to improve both end-use efficiency and the efficient use of surplus energy were evaluated for cost- effectiveness. Three future load-resource conditions were identified and labeled as Phases 1 through 3 for conserva- tion planning purposes. AEL&P's projected marginal energy costs and bases for conservation during each of these phases are substantially different from one another. As a result, measures that were found to be cost-effective in one phase of the program were found not to be cost-effective in other phases. General conclusions and recommendations were that, in Phase 1, start-up activities be accomplished for subse- quent phases; in Phase 2 dual-fuel service should be promoted and implemented; and, in Phase 3, traditional conservation and fuel switching should be pursued to reduce firm electric energy requirements. The next step in our study was to determine the general ap- proach for marketing the various measures to AEL&P customers. Results of this analysis are presented in this chapter. PROGRAM TYPES Four general program approaches were considered. Information programs Incentive payment programs Regulatory programs Rate incentives for dual-fuel service 0000 INFORMATION PROGRAMS Information programs are based on the premise that if cus- tomers are informed of cost-effective conservation actions and perceive little risk, they will implement the conserva- tion measure. As such, information programs are used to persuade customers to implement cost-effective conservation measures. Information programs consist of advertising, edu- cation, direct contact with customers, and other marketing techniques short of offering incentive payments. lin Volume 2, Task Reports 4 and 6 refer to five program approaches. The fifth approach was information programs for conversion from electric to fossil fuel heating systems when AEL&P is forecast to need new generation facilities (Phase 3). For presentation in this chapter, the infor- mation program for heating conversions has been consoli- dated with general information programs. Si INCENTIVE PROGRAMS Incentive payment programs provide monetary incentives to customers to install conservation measures. The incentive could take any of a variety of forms including cash rebates, delayed payment, interest-free loans, or billing credits. Typically, if incentive payments are made, they are made when it is economical for the utility to do so. That is, when the marginal cost the utility avoids through load reduc- tion is greater than or equal to the sum of the incentive paid and the revenue lost from reduced sales, and therefore, the "no-losers test" is satisfied. REGULATORY PROGRAM Regulatory programs are implemented through government regu- lations. Most often they are implemented by local or state governments, municipalities, or public utility commissions. Examples include energy standards in building codes, effi- ciency standards for conversions to electric heat, and elec- tric heat moratoriums. Energy codes are enacted by local governments and require that buildings meet a minimum level of energy efficiency. The Juneau Energy Code is an example of such a program. Seattle City Light, a municipal utility, has a set of regu- lations requiring that efficiency standards be met prior to a customer converting to electric heat. The program has been effective in reducing the amount of electricity used by customers who convert, and in reducing the number of conver- sions to electric heat. In most cases, private utilities do not have the legal authority to implement such a program. The final example of a regulatory program is an electric heat moratorium. In this case, all hookups to electric heat are banned. In 1983, AEL&P filed an application with the Alaska Public Utilities Commission (APUC) to obtain author- ity to implement an electric heat moratorium. The APUC re- jected this regulatory program. RATE INCENTIVES FOR DUAL-FUEL SERVICE Inclusion of conservation incentives in rate design is a highly controversial issue. The general subject is addressed in AEL&P's Rate Plan. Consideration of rate incentives in this conservation plan- ning study was limited to rate incentives for dual-fuel ser- vice. As discussed in Chapter 4, a special, discounted rate for dual-fuel service is necessary for AEL&P to achieve its strategy for utilizing surplus hydroelectric energy. A rate discount must be offered to make dual-fuel service attractive to customers who would otherwise heat with fuel oil alone. 52 RESULTS OF THE ANALYSIS Each of the four program types was evaluated against the nine evaluation criteria outlined in Table 2. A formal evaluation matrix was developed with subjective ratings given to each program type for its perceived effectiveness in meeting each evaluation criterion. The evaluation process is described in the Task 6 report included in Volume 2. RECOMMENDED PROGRAMS: _INFORMATION AND DUAL-FUEL RATE PROGRAMS The conclusion reached from this process was that AEL&P should use information and dual-fuel rate programs as bases for marketing energy conservation and management measures to its customers. These conclusions were based primarily on two considerations: cost-effectiveness and AEL&P's ability to implement the program. Most conservation measures found to be cost-effective to AEL&P (and which therefore pass the no-loser's test) were also found to be cost-effective to the customer. Assuming that customers will generally respond positively to cost- effective opportunities, an information program was viewed as a cost-effective method for inducing customers to invest in conservation, whether it be a dual-fuel system or a tra- ditional conservation measure. As mentioned above, a discounted electric rate is needed to make dual-fuel service cost-effective to consumers. Not only must a dual-fuel rate reflect the lower quality of interruptible electric service compared to firm service, but it also must be set low enough to induce customers to invest in the service. As noted in Chapter 4, the rate and other provisions for dual-fuel service need to be carefully de- signed so that, during Phase 2, firm electric customers are not given incentive to shift to dual-fuel service. Information programs could be directly implemented by AEL&P. Expenditures on the program would need to be approved by the Alaska Public Utilities Commission (APUC). However, given proper presentation, we anticipate that the APUC would ap- prove such expenditures. Similarly, since AEL&P already has dual-fuel rates on file with the APUC, AEL&P should be able to receive approval for adjustments to the dual-fuel rate and conditions of service with relatively little controversy. INCENTIVE AND REGULATORY PROGRAMS Incentive and regulatory programs were eliminated as primary bases for AEL&P's conservation programs. Incentive payment programs are not likely to be cost-effective for two 53 reasons. First, as described in Chapter 4, the incentive AEL&P could justify would be relatively small since most conservation measures, without any incentive payments, would have benefit-cost ratios to AEL&P of only 1.2. After admin- istration costs and advertising and other promotional costs, little would remain for the actual incentive payments. Sec- ond, as noted above, most of the conservation measures eval- uated in the study that proved to be cost-effective to AEL&P were also cost-effective to the customer. Therefore, cus- tomers should willingly adopt these measures without incen- tives. Beyond such measures, there are few others for which incentive payments would be cost-effective. They are limited to a small number of measures that would be cost-effective to AEL&P but not to the customer. The result of these facts is that not only would the incen- tive payments be small, but the number of actions for which incentive payments could be offered would be limited to a small number of marginally cost-effective measures. These conditions could create public relations problems for the incentives program and, in fact, could harm the entire con- servation program. Incentive programs would also require APUC approval. Since they are also expected to be more controversial, they would likely be more difficult to implement than other utility- sponsored program types. Regulatory programs are cost-effective but apply primarily to new construction. Therefore, regulatory programs are not effective in implementing conservation among existing cus- tomers. Additionally, because AEL&P has no direct control over regulatory programs, its ability to implement regulatory programs is limited to the influence it may have with regu- latory bodies such as the City or Borough of Juneau. Regulatory programs could serve as a backup to the informa- tion and dual-fuel rate programs. We recommend that AEL&P continue to lobby for municipal and state regulations that are cost-effective from the perspective of the customer, AEL&P, and society in general. 54 Chapter 6 PROGRAM MARKETING PLAN This chapter contains a plan for the marketing of energy conservation and management measures to AEL&P's customers. The plan focuses on information as a marketing tool. In the plan we set forth ways in which AEL&P can promote or dis- seminate information that is likely to persuade its custo- mers to adopt selected conservation measures. PLANNING FRAMEWORK When AEL&P's energy conservation and management study was begun, the focus of the study was on conservation measures aimed at the reduction of electricity consumption through more efficient end uses. With the prospect of hydroelectric surpluses developing once the Crater Lake project is com- plete, the plan was defined to also include measures to im- prove efficiency in the choice of energy resources to be utilized. As a result, the energy conservation and manage- ment program, while focusing on conservation measures to improve efficiency in energy use, also includes ways to con- serve energy through use of surplus hydroelectricity that would otherwise be wasted. Interruptible dual-fuel service was identified as a primary means for using the hydroelec- tric surplus without creating a future need for development of additional resources. The marketing plan presented in this chapter was developed primarily for the marketing of conservation measures to re- duce usage. A general marketing plan was also prepared for use of surplus energy through dual-fuel service. The dual- fuel marketing plan needs to be augmented with more specific dual-fuel market analysis. To this end, AEL&P has formed a dual-fuel marketing task force with APA and Glacier Highway Electric Association to conduct this analysis and develop a more specific dual-fuel marketing plan and proposed rate structure. We recommend that the report of this task force be added to AEL&P's conservation plan as Volume 3. THE MARKETING PROBLEM The problem the marketing plan addresses is that some con- servation measures that are cost-effective for customers will not be adopted to the extent desirable unless customers are adequately informed of (1) which measures are cost- effective, (2) how to install or adopt these measures, and (3) how these measures will yield financial and environmen- tal benefits and will make customers' homes and offices more comfortable. a0 MARKETING PLAN GOALS General goals of the energy conservation and management plan were adopted in an early planning meeting for this study. These goals are summarized in Chapter 2 of this report. Establishment of a marketing plan is part of the strategy to achieve these general goals. As the energy conservation and management plan was developed and more knowledge of the potential market for conservation measures was gained, the following three goals were estab- lished for the marketing plan: ° Use of the surplus energy supply from the Snettisham and Crater Lake projects through pro- motion of interruptible, dual-fuel service for residential and commercial space heating. Such use promotes conservation in that it prevents sur- plus energy from being wasted. ° Inducement of customers to adopt conservation mea- sures that are cost-effective from three perspec- tives: the customer's, AEL&P's, and society's. By being cost-effective from these three perspec- tives, conservation measures pass the "no losers test" set forth in the overall goals of the con- servation plan. ° Maintenance of good relations between AEL&P and the community by showing that AEL&P is concerned about the financial well being and physical com- fort of its customers. These goals are largely complementary; informing customers of, and helping them adopt, cost-effective conservation mea- sures should enhance AEL&P's community image. Some con- flicts between goals might develop, however, and would need to be rectified through a setting of priorities among goals by AEL&P management. For example, if AEL&P begins promoting the adoption of conservation measures in new construction, to prevent lost opportunities for conservation and avoid the need for expensive retrofit measures in the future, the utility's efforts will likely be good for its community relations. But if these measures are promoted during the current period of no growth in demand and hydroelectric sur- pluses, the measures might fail the no-losers test. This situation might then require AEL&P to decide which goal is more important: meeting the no-losers test over the long run or maintaining good community relations in the short run. 56 FEATURES OF THE PLAN This marketing plan incorporates three major considerations that stem from AEL&P's program needs and other utilities' experience with conservation programs: ° In the plan we suggest how conservation measures and the information necessary for their adoption can both be phased in between now and the time when demand approaches the capacity of the Crater Lake project. ° The plan reflects the importance of initially not "overplanning" a conservation information cam- paign. In the plan we suggest provisions for ongoing monitoring and testing of information techniques so that program changes can be made quickly if necessary. ° The plan builds on television and radio advertis- ing already done by AEL&P, which has created fa- vorable customer awareness of conservation. A key element in the success of energy conservation and man- agement programs is the character of the community in which they are implemented. Juneau has a small, relatively homo- geneous population, many customers have a favorable attitude toward the utility, and many customers know AEL&P's employees. There is also a large number of home-owning, high-income, well-educated, do-it-yourself customers who are the most likely to install conservation measures. These characteris- tics of Juneau all give AEL&P's conservation program an ex- cellent chance for success. TARGET CONSERVATION MEASURES AEL&P's marketing efforts will focus on conservation meas- ures that are cost-effective from three perspectives: those of AEL&P, the customer, and society as a whole. As dis- cussed in Chapter 4, after planning and startup activities in Phase 1, the focus of the energy conservation and manage- ment program will shift in Phase 2 to the marketing of sur- plus hydroelectric energy and in Phase 3 to the marketing of measures designed to reduce energy use. The target conser- vation measures for the marketing program will be dual-fuel service in Phase 2 and measures designed to improve effi- ciency in usage to reduce consumption in Phase 3. Specific measures shown to be cost-effective in Phase 3 were summar- ized in Table 21. By) TARGET GROUPS AEL&P's information campaign will be conducted to induce certain customers to adopt the target conservation measures. These customers make up the "target groups" for AEL&P's con- servation program. They must take action to conserve if AEL&P's program is to succeed. We have identified 8 such groups: his Home buyers, who will benefit from purchasing dual-fuel systems and energy-efficient new or resale homes 2h Home builders, who must decide to build homes that meet AEL&P's energy efficiency standards Sie Owners of existing homes, who will benefit from in- stalling the dual-fuel systems and other conservation measures AEL&P recommends for existing single-family homes 4. House and apartment renters, who will benefit from in- stalling measures with shorter payback periods 5. Owners of existing apartment buildings and rental houses, who might be persuaded to install conservation measures in their buildings if they see conservation as (1) a good marketing tool for their rental units and (2) offering a good return on their investment in the measures 6. Appliance purchasers, who will benefit from buying en- ergy-efficient refrigerators, freezers, clothes wash- ers, and dishwashers fa Owners and managers of commercial and office buildings, who make decisions about the purchase of lighting, HVAC equipment, and insulation for their buildings 8. Commercial tenants who pay their own electric bills and, like residential renters, might benefit from in- stalling shorter-payback measures The target groups for each conservation measure are shown in Table 22. The table also indicates how measures are likely to be "packaged" by sector and end use before they are mar- keted to target groups. AEL&P staff should keep in mind the interests of pertinent target groups when they prepare information on particular Measures. Separate messages about retrofit insulation, for example, might be tailored to the separate interests of homeowners, renters, commercial and office building manag- ers, and commercial tenants. 58 Z Sector Exising Single-Family Existing Multifamily Commercial Office Retail Other New Residential and Commercial New Single-Family and Multifamily Al New Single-Family New and Existinc Residential Construction Existing Multifamily Existing Residential Residential Commerical Of fice Retail Other Table 22 TARGET GROUPS FOR ADOPTION OF CONSERVATION MEASURES Ene Use Space heat Space heat Heating, ventilation, and air conditioning (HVAC) Space heat Space heat Space heat Water heat (new or re- placement tanks) Space heat Water heat (existing tanks Appliances Lighting by) Conservation Measure Ceiling RO to R19 R19 to R30 R30 to R38 Walls RO to R11 Floor RO to R19 R19 to R30 Single- to triple-pane windows Dual-fuel furnace (electric ané oil) incentive rate Heat pump retrofit in place of forced air Walls RO to Rll Ceiling RO to R38 Floor RO to R38 Temperature Setback, 10° Wall Insulation to R13 Ceiling Insulation to R30 Dual-fuel furnace (elec- tric and oil) ancentive rate Double- to triple-pane windows Insulatec doors Roof R30 to R38, standard Floor R12 to R30 Heat pump in place of forced air Reduceé infiltration plus heat exchanger Improved tank insulation ané heat traps Energy efficient or fossil fuel tanks Single- to double-pane windows Tank wrap and heat traps Moderate- or high-efficiency refrigerators, freezers, clothes washers, ané ¢ishwashers Efficient lights (19¢5 installation) Target Groups Homeowners Long-Term Renters Landlords Renters Who Pay Electric Bills Builéing Owmers and Managers Tenants Who Pay Bills New-home buyers Fome and commercial builders Building owners ané managers New-home Buyers Kome Builders Lanclords Apartment Renters New-home Buyers Home Builders New-home Buyers Home Builders Homeowners Landlords Homeowners Rer.ters Appliance Buyers Building Owner ané Managers Terants Who Pay Electric Pills AEL&P might also benefit from further segmenting Juneau into "neighborhood target markets" where direct, person-to-person contact with most customers will be possible. Such an approach might create a "critical mass" of program accep- tance among residents of the target neighborhood. Recent research by the Electric Power Research Institute, as re- ported in the October 1986 EPRI Journal, has shown that such an intense marketing effort was crucial to the success of a program for direct utility control of water heaters and air conditioners (Ref. 6-1). A similar approach might work in Juneau neighborhoods for the installation of ceiling insulation, weatherstripping, or other easily installed retrofit measures. Such an approach could also be adapted to reflect the differences among Juneau's neighborhoods. For example, conservation measures might be marketed in one way to the owners of downtown Juneau's older housing and in another way to the suburban residents who own newer homes in the Mendenhall Valley. INFORMATION DESIGN This section focuses on the information that AEL&P will pre- pare to induce members of target groups to conserve. Two main topics are discussed: the information: approaches and media available to AEL&P, and guidelines that will help AEL&P reach its customers with effective conservation messages. INFORMATION APPROACHES AND INFORMATION MEDIA Information will be the tool used by AEL&P to persuade its customers to adopt conservation measures. Persuasive infor- Mation can be delivered by a variety of media ranging from informal conversation to mass advertising. For AEL&P's con- servation program, these media will fall into four main approaches to target groups (the prospective adopters of conservation measures): (1) advertising and promotion, (2) customer education, (3) direct contact, and (4) trade ally cooperation. ° Advertising and promotion are useful in making customers (1) aware of the existence and benefits of dual-fuel service and other conservation mea- sures and (2) decide to adopt a measure. Their primary purpose is to present the conservation message in an attention-getting way (Ref. 6-2). ° Customer education is to convince customers of the benefits of adopting a dual-fuel system or other conservation measure. It differs from advertising 60 va by placing more emphasis on explanation and ex- position of conservation benefits (Ref. 6-3). ° Direct contact is face-to-face communication be- tween the customer and a utility representative. It focuses on the individual customer's concerns by providing a tailored message to the customer and obtaining the customer's feedback, which the utility can then use for further refinement of the message in response to the customer's concerns. ° Trade ally cooperation means enlisting the help and involvement of "any firm, individual, or orga- nization whose interactions with its customers or members can influence the relationship between the utility and its customers." (Ref. 6-4). Typical trade allies are building contractors, developers, insulation dealers, architecture and engineering firms, HVAC contractors, appliance dealers, and conservation contractors. Table 23 contains a summary of the functions, advantages, disadvantages, and best uses of each approach. More infor- mation about each approach is included in the Task 6 report in Volume 2. Table 24 describes, for each approach, the information media we believe will be most appropriate for Juneau. The importance of drawing distinctions among the four media approaches lies in the fact that customers go through four stages when they decide to purchase or adopt a conservation measure: (1) need recognition, (2) search for alternatives, (3) purchase decision, and (4) reaffirmation of, or satis- faction with, the decision. The four media approaches re- late in specific ways to this decisionmaking process: ° Customer education is important during the need-recognition phase. ° Direct contact, trade-ally cooperation, and advertis- ing are important during the search for alternatives. ° Trade-ally cooperation is important during the purchase-decision stage. ° Direct contact and customer education are impor- tant during the purchase-affirmation stage. AEL&P's television programs on conservation have already taken many customers through the need-recognition stage. These individuals are now ready for information (via direct contact, trade-ally cooperation, and advertising) that will support their search for alternatives. 61 zo Approach Customer Education Direct Customer Contact Trade Ally Cooperation Advertising/Promotion Source: EA-4267. Electric Power Research Institute. Prepared by Synergic Resources Corporation. Table 23 FUNCTIONS, ADVANTAGES, DISADVANTAGES, AND BEST USES OF VARIOUS MARKETING APPROACHES Functions Inform customers of program availability/ eligibility. Present advantages of technology or behavior being promoted. Allow for more exact and customized analysis of alternatives and in- stallation of demand- side options. Encourage purchase of electric technologies/ appliances at point-of- sale and increase the channels of distribution. Increase program awareness. Present advantages of electric technologies or behaviors being promoted. Move customer toward adoption. ° October 1985. Advantages Reaches large number of customers at low cost per customer. Provides broad coverage, keeps utility name and message before the customer. Allows customized service and in-depth marketing; good for closing the sale. Personalizes the utility/ customer relationship. Utility does not bear all costs of marketing effort. Utility gains interested partner in the marketing effort. Third party endorsement. Greater coverage during critical decision periods. Provides after sale service resource. Broad or specialized targeting possible, de- pending upon media chosen. Keeps utility name or program concept before customers. Can present utility in similar format as other purveyors of service to the customer. ° ° ° Disadvantages Generally has relatively o low impact. Tends to be quite costly o per customer contact. Can engender negative reaction from trade allies. Requires coordination. ° Some loss of program control. Can be expensive. ° Impact generally difficult to measure. Best Uses Increase customer aware- ness and interest in demand-side options. Present information on technology, program bene- fits, and availability/ eligibility requirements. Consultation to customers regarding large expendi- ture purchases helps re- duce risk and uncertainty. General promotions of appliances where point- of-purchase advertising/ persuasion is likely to be beneficial. Program announcements, specialized presentations of technologies/benefits. Marketing Demand-Side Programs to Improve Load Factor, Volume 2: A Synthesis of Utility Experience. pp. 6-6 and 6-7. a G9 Table 24 CONSERVATION INFORMATION APPROACHES AND APPROPRIATE MEDIA FOR JUNEAU Approach Customer Education Information Media Bill Inserts Direct Mail Pamphlets, Leaflets, Brochures Speakers at Local Schools Speakers at Civic Organizations Comments on Use in Juneau Low in cost, widely read by customers, but inserts do not prompt customer participation. Useful for creating customer awareness of conservation, which makes customers more recep- tive to other marketing efforts. Letters sent to customers determined to be good candidates for program participation. Very effective in getting customers to adopt conservation measures. Likely use in Juneau: send letters to customers with high winter electric bills; in letter describe ways to con- serve heat and how to get more information. Response rates might be up to 50 percent. Also, send letters to new-home builders. Basic information sources. Usefully distributed through variety of outlets: information booths at local events, furnace dealers (subject: dual-fuel service), appliance stores (subject: appliance efficiency); realtors (subject: energy efficient new homes); hard- ware stores (subjects: retrofit home insulation, weatherstripping, water heater insula- tion, double- and triple-glaze windows). Brief, simple format desirable. One-page sheet of tips is sufficient in most cases. Pamphlets can be obtained from other sources (e.g., Alaska Extension Service or another utility) and redesigned if necessary, in AEL&P format. Should provide a phone number for more information. Effective, inexpensive way of converting students into conservation advocates at home, who will prompt parents to conserve. Speakers should emphasize why AEL&P is interested in conservation, the benefits of conservation (environmental protection, comfort, money sav- ings), AEL&P's desire for suggestions from the community, and types of conservation meas- ures encouraged by AEL&P. Useful to give students items displaying program logo that will be in view at home (e.g., refrigerator magnets). Effective, inexpensive way of reaching community opinion leaders. Organizations such as Kiwanis Club or Chamber of Commerce are useful places for reaching realtors, bankers, and merchants who are vital as program supporters. v9 Approach Advertising Information Media Informal Conversation Between Utility Staff and Customers Information Hotlines and Clearinghouses General Media Advertising Television Radio Table 24 (Continued) Comments on Use in Juneau Instructing staff about AEL&P's conservation program--what it is, why it is being done-- will make them informal educators of others in the community. Their subsequent informal conversations about the program with friends and neighbors should be very effective in a small, close-knit community like Juneau. A telephone hotline is necessary so that customers can call AEL&P for more information after seeing a brochure or ad. The clearinghouse will be the place where information is available at AEL&P. Television, radio, and newspaper advertising can increase program participation rates by 5 to 10 percentage points, according to 1986 SRC research. AEL&P has already run 60-second spots on what residential customers can do to conserve without hiring a contractor and on what AEL&P is doing to extend its low-cost energy re- sources and prevent rate increases. AEL&P has also produced and broadcast several 30- minute programs on how homes can be made more energy efficient. These ads and programs have been well received by customers according to comments received informally from customers. Because of this favorable response and the low cost of television advertising in Juneau, it should be a key medium. Spots should give viewer a phone number for more information. Use of testimonials from local residents should be effective. Radio is popular in Juneau, especially during morning and afternoon "drive times," because majority of workforce is employed by state and has same working hours. Radio time is in- expensive in Juneau. Like television, it should be a key medium, centered around a short, easy-to-remember theme, and it should give listener a phone number for more information. Use of testimonials from local residents should be effective. S9 Table 24 (Continued) Information Approach Media Comments on Use in Juneau Newspaper Usually a major source of information about a utility's conservation program, but probably Point-of-Purchase Displays Direct Customer Energy Audits Contact Residential and Commercial Workshops Booths and Displays less appropriate in Juneau because of the city's high cost of newspaper advertising. Memorable themes, customer testimonials, and telephone information number should be in- corporated. If Juneau has a "shopper" advertising newspaper, this might be an effective, inexpensive print medium, as it has been for other utility programs. Useful in conjunction with trade ally cooperation. Should be available to residential and commercial customers on request. Success of audit (i.e., whether or not customer adopts measures recommended by auditor) will depend on personality and salesmanship of auditor. Auditor should emphasize money savings, personal comfort, and property value appreciation that can result from adoption of conservation measures. Recent SRC studies show that participation in residential audit programs can be as low as 5 percent. In commercial sector, audits can be popular if utility representa- tive regularly contacts commercial customers, discusses energy problems with them, surveys their facilities, and identifies possible energy and cost savings. Cost of such attention usually limits it to largest commercial customers. Technical sessions on how to install conservation measures in existing buildings. Work- shops develop technical expertise among customers, resulting in greater adoption of measures and enthusiastic support for conservation among workshop attendees, who then influence others in community. Useful at large gathering places like shopping malls, fairs, and large office buildings. Might be particularly useful in Juneau after the first heat bills of winter are mailed. 99 roach Trade Ally Cooperation Information Media Vendors to Commercial Customers Residential Appliance Dealers Plumbers Table 24 (Continued) Comments on Use in Juneau AEL&P should promote and coordinate the dissemination of conservation information from vendors (who sell lighting, insulation, and space- and water-heating equipment) to com- mercial customers. This coordination will be an effective way of selling conservation to commercial customers. Vendors deal with building managers who purchase energy using equipment. Often these managers are hard for the utility to find and influence directly, so vendor is a valuable intermediary. Cooperation can involve joint advertising and pro- motion campaigns, AEL&P endorsement of certain products (which helps overcome customer's skepticism), and workshops that explain conservation measures to vendors. AEL&P should initially ask vendors how they would like to cooperate (e.g., how should cooperative ad- vertising be done) and should give vendors time to stock energy efficient items (e.g., energy efficient light bulbs and ballasts). Dealers are useful allies in (1) reaching person in household who makes or influences appliance-purchase decisions (e.g., husband, wife, sometimes child) and (2) encouraging that person to purchase an energy efficient appliance. Dealers must be informed that energy efficient appliances really save energy (SRC research indicates many dealers do not see efficiency differences among appliances, despite DOE labels). They must tell cus- tomers that energy efficient appliances can have as many features as conventional types (e.g., no need to sacrifice ice maker in a refrigerator). Cooperative advertising, en- dorsement of products by AEL&P, and distribution through dealers of pamphlets on efficient appliances are possibilities, but AEL&P should solicit ideas from dealers at start of program. When old water heater breaks down, the new heater is often picked by plumber who does the replacement. Cooperation with plumbers can influence them to use, or offer to customer, an AEL&P-recommended model. L9 Approach Information Media Home Builders Building Supply Dealers Table 24 (Continued) Comments on Use in Juneau Cooperation with home builders can be very effective in promoting energy efficient new construction. The utility defines a package of measures (e.g., insulation levels, type of wood stove/fireplace, appliance efficiencies, types of windows, and infiltration control) that it recommends. If a new home incorporates all of these measures, then the utility certifies the home as being energy efficient. The builder can use this certification to help sell the home. The Excellence in Energy Efficiency (Philadelphia), Energy Star (Austin), and Super Good Cents (Pacific Northwest) are examples of very successful pro- grams to promote energy efficient new construction. In some areas, more than 30 percent of all new homes are built to these energy efficiency standards. We would expect even a higher participation in the Juneau area, because of the relatively small number of builders, strong interest in energy conservation, and the close knit nature of the community. Cooperation similar to that described above for residential appliance dealers should help building supply dealers sell more insulation, double- or triple-pane windows, and weather- stripping material. Dealers should at least have brochures or leaflets that list the cost-effective measures for Juneau along with the average cost, electricity savings, payback period, and electric bill savings for each measure. The four media approaches are also useful in overcoming bar- riers to customer acceptance of conservation measures. Seven such barriers, or customer perceptions of drawbacks to conservation, are likely to exist in Juneau: (1) low return on investment, (2) high first cost (but a favorable return on investment), (3) lack of knowledge or awareness, (4) lack of interest or motivation, (5) apprehension of a decrease in comfort or convenience, (6) limited product availability, and (7) preception of personal risk in adopting a measure. Each media approach is particularly well suited for overcom- ing one or more of these barriers. For example, customer education and direct customer contact are good for overcom-— ing a customer's lack of knowledge or awareness, trade-ally cooperation is vital to overcoming limited product availa- bility, and both direct customer contact and trade-ally co- operation are useful in overcoming a customer's concern about the risk involved in adopting a conservation measure. GUIDELINES FOR THE CONSERVATION MESSAGE We recommend that AEL&P and its local media consultant be responsible for the creation and content of conservation information prepared by AEL&P. Utility and local media con- sultant staff understand AEL&P's customers and therefore are best qualified to prepare the messages that will reach these customers effectively. Preparation of these messages might benefit from the following guidelines that other utilities use in creating their conservation marketing materials: ° The message carried by information media should be that conservation saves money, helps preserve the environment, and enhances personal comfort. The promotional value of the first benefit, money sav- ings, obviously is important; everyone likes to save money. But the two other benefits, though less tangible than saving money, also deserve strong emphasis. Juneau is a well-educated, envi- ronmentally aware community that should respond well to the environmental benefits of conserva- tion. Emphasizing the increase in personal com- fort that can result from installing conservation measures, such as insulation or double-pane win- dows, should also work well in Juneau. Other utilities in the Pacific Northwest that have sev- eral years of conservation program experience, notably the Bonneville Power Administration, now place more emphasis on personal comfort than they did initially, mainly because their program par- ticipants see increased comfort as a primary benefit. ° Customers should receive the message about a par- ticular conservation measure several times, through various media, to induce them to adopt the measure. ° The conservation messages should be simple and the conservation program should have an easy-to- remember name, e.g., Save-a-Watt. Some of the subprograms should also be named for easy identi- fication. For example, an insulation program might be called Heatkeeper and a lighting conser- vation program might be called Econo Light. ° Messages about space-heat conservation are most effective just before and during the heating sea- son. Media placement decisions should reflect this fact. DESIGN AND IMPLEMENTATION OF THE INFORMATION PROGRAM The preceding sections contain descriptions of the conserva- tion measures, target groups, and information media that we recommend for AEL&P's conservation program. This section brings together the findings from these earlier sections to create an information program that AEL&P can implement be- fore a new, high-cost energy resource such as Dorothy Lake comes on-line. RECOMMENDED PROGRAM We recommend that AEL&P implement a conservation marketing program according to the seven steps outlined in Table 25. This program consists of the most important, potentially most successful activities that AEL&P can carry out to in- duce its customers to conserve electrical energy. The following guidelines apply to the program steps and the assignment of each activity to a particular step: ° Program steps are consistent with the three phases defined for AEL&P's conservation program. When the utility enters a new phase, it will be time for AEL&P staff to begin implementing the conser- vation program steps suitable to that phase. In Table 25 the relevant supply phase is parentheti- cally noted for each conservation program step. ° A step can extend beyond the end of its initial program phase; a step should end when AEL&P's mon- itoring of program effectiveness shows that the conservation measures within a step have ade- quately penetrated the market, or that conditions 69 Program step” 1. Startup Activities OL Table 25 RECOMMENDED MARKETING ACTIVITIES FOR AEL&P'S ENERGY CONSERVATION AND MANAGEMENT PROGRAM Emphasizing Dual- Fuel Service (Phases 1 and 2) A. B. Marketing Activity Sector/End Use Target Groups Information Approach Organize dual-fuel task force to nego- tain approval from the APUC for permanent dual-fuel service. Complete a study of the potential market Residential and Commercial/space heat for the dual-fuel rate. Forecast the market penetration rate and nonfirm hydroelectric energy sales that will re- sult from the dual-fuel rate. Estimate losses of firm electric sales that will result from conversion to dual-fuel heating by current electric-heat customers. Develop simple, easy-to-recognize slo- General gans and logos, emphasizing savings, for the overall conservation program and the dual-fuel program. Slogans and logos should be used on advertising, pam- phlets, displays, and other promotional materials for dual-fuel and later con- servation measures. To prevent confusion of dual-fuel program with overall con- servation program, the dual-fuel logo and slogan should be distinct from, but re- lated to, the overall program logo. Resident ial/space-heat; tiate dual-fuel with APA, assess market commercial, office, potential for dual-fuel service, and ob- retail, other/HVAC Home buyers, homeowners, Alternative Pricing home builders, building owners and managers Homeowners, new-home buyers, building owners and managers Alternative pricing All All “the appropriate program phase when each step should begin is noted parenthetically after each step. TZ Program Step D. Marketing Activity Produce a limited number of media ad- vertisements that: (1) emphasize AEL&P's concern about delaying con- struction of new power plants and re- ducing customer costs, (2) publicize dual-fuel heating as an alternative to oil heat, and (3) provide a contact for more information. Implement an employee communication program so that employees are informed about dual-fuel service and the reasons why AEL&P is interested in conservation. Contact furnace and boiler dealers. In- form them of pending dual-fuel rate and probable market for dual-fuel furnaces and boilers in new construction and as replacement units in existing buildings. Solicit their ideas for cooperative efforts. Suggest such ideas as joint advertising, point-of-purchase displays, and AEL&P endorsement of dual-fuel fur- naces and boilers. Prepare brochures for residential and commercial customers about dual-fuel rate and furnaces or boilers. Include information about cost of conversion to dual-fuel heating and the payback periods and savings likely for Juneau participants. Table 25 (continued) Sector/End Use General General Residential/space heat; commercial, office, retail, other/HVAC Residential/space heat; commercial, office, retail, other/HVAC Target Groups Information Approach All Advertising All Direct contact Home buyers, homeowners, home builders, building owners and managers Trade Ally New-home buyers, home- Customer Education owners, building owners, builders Program Step - Implement Dual-Fuel-Service Marketing Campaign (Phase 2) H. c. Marketing Activity Establish an information hotline and clearinghouse. Hotline will be a tele- phone number that customers can call for more information after they see an ad or brochure. Clearinghouse will be for location of program information at AELS&P. Contact and inform builders about the pending dual-fuel rate and benefits of dual-fuel heating. Establish dual-fuel rate Working with furnace and boiler deal- ers, implement ideas for trade-ally co- operation solicited during Step 1. Provide dealers with brochures on dual- fuel service for their customers. Advertise rate through general media and point-of-purchase advertising Table 25 (continued) Sector/End Use General Residential/space heat; commercial, office, retail, other/HVAC Residential and Commercial/space heat Residential/space heat Residential and Commercial/space heat Target Groups All New-home buyers and builders; commercial, office, retail, and other new-building buyers and builders Homeowners, new-home buyers, building owners and managers Homeowners Homeowners new-home buyers, building owners and managers Information Approach Customer Education Trade Ally Alternative Pricing Trade Ally Advertising ee Table 25 (continued) Program Step Marketing Activity Sector/End Use Target Groups| Information Approach D. Dual-fuel task force evaluate whether Residential and Homeowners new-home Customer Education, Trade 3. Startup Activities for Conservation to Reduce use of Electricity (Phase 3) to send letter and brochure on dual-fuel Commercial/space heat service to residential and commercial customers who heat with oil or propane. Brochure would give AEL&P specific in- formation about the cost, savings, and payback periods for dual-fuel service. Produce a limited number of media General advertisements that: (1) emphasize AEL&P's concern about delaying con- struction of new powerplants and re- ducing customer costs, (2) list the conservation measures AEL&P endorses, and (3) provide a contact for more information. Implement an employee communication pro- General gram so that employees are informed about the conservation programs, measures, and services AEL&P offers and the reasons why AEL&P is interested in conservation. Send annual letter to customers listing Residential and their monthly energy consumption for the Commercial last 12 months. buyers, building owners Ally and managers All Advertising All Direct Contact Homeowners and renters; Customer Education commercial building owners, managers, and tenants Program Step vl D. Fe Marketing Activity Contact trade allies. Inform them of conservation measures. Solicit their ideas for cooperative efforts. Suggest such ideas as joint advertising, point- of-purchase displays, and AEL&P en- dorsement of products. Coordinate efforts to create comprehensive use of these information media. Address need for better service of heat pumps. Prepare or adopt from other utilities a series of pamphlets on weatherstripping, caulking, home insulation, weatherized windows, and general conservation tips. Include the average cost, electricity savings, payback period, and dollar savings of these measures in Juneau. Develop an information booth that can be easily set up at community events. The information booth should be a method of distributing pamphlets and should be staffed by a person who is well informed about conservation measures. Develop a pamphlet on ways to reduce high heating costs and distribute it through hardware and lumber stores. Residential/space heat; commercial, office, retail, other/HVAC Table 25 (continued) Sector/End Use Target Groups General All General All General All Homeowners, renters; building owners, tenants Information Approach Trade Ally Customer Education Customer Education Customer Education SL 4 b, Table 25 (continued) Program Step Marketing Activity Sector/End Use Target Groups _ Information Approach H. Provide speakers on energy conservation General All Customer Education to civic organizations and schools. Furnish speakers with promotional "giveaway" items, such as outlet in- sulators and refrigerator magnets that carry program logo. I. Adopt recommended conservation measures Commercial/HVAC and All Direct Contact in AEL&P buildings for future use as Lighting example of good conservation practices. - New Construction” A. Institute a new-home certification pro- Residential/space heat New-home buyers Trade Ally (Phase 3 and gram in which new homes that include all possibly earlier conservation measures that AEL&P thinks phases) are desirable receive a certification from AEL&P. Concentrate on single- family homes initially. Design logo and brief name (e.g., Heatkeeper) for program. B. Distribute pamphlets about the meaning Residential/space heat New-home buyers Trade Ally, Customer of an energy-efficient home through Education homebuilders, realtors, and information booths at community events. The new-construction program should begin with single-family housing because it offers the best initial return on program investment. After about. 1 year, the program probably can be extended to multi-family housing when owners of such housing have seen the results of single-family programs and might see conservation as (1) an apartment marketing tool and (2) a good return on investment. The new-home certification program could be modeled after the Good Cents program offered by the Southern Company. This new-home certification program is available as a package of services that in- cludes training of utility staff, guidance in the preparation of advertising, and detailed manuals on program implementation. A program description and cost information are in Volume 2, the Task 8 report. The program has been purchased by several utilities including the Bonneville Power Administration, which modified it to create the Super Good Cents program. Because BPA is a government agency, the Super Good Cents program materials are in the public domain and available at low cost. Information about the Super Good Cents program is in the report on Task 8 in Volume 2. SL Table 25 (continued) Program Step Marketing Activity Sector/End Use Target Groups Information Approach C. Work with builders and local newspapers Residential/space heat New-home buyers Advertising to print program logo and name in ad- vertisements for certified homes. 5. Water Heaters and A. Contact plumbers and other water heater Residential/water heat Homeowners (water Trade Ally Appliances (Phase 3 and possibly earlier phases) 6. Existing Buildings® (Phase 3) c The certification of existing homes could be modeled after the Good Cents or Super Good Cents programs described in footnote dealers and installers and inform them of AEL&P's recommendations about energy- efficient and fossil-fuel water heaters. Pamphlets should be provided to these trade allies to give to their customers. Develop an energy-efficient appliance program that consists of: (1) efforts to educate dealers about appliance efficiency and (2) distribution of pamphlets through dealers and booths at community events. Send a letter and pamphlet on how to reduce heating costs to residential cus- tomers with high winter heating bills. In letter give AEL&P-specific informa- tion about recommended conservation mea- sures, their cost, savings, and payback periods. Helping these customers reduce their bills will create good word-of- mouth publicity, the best form of advertising. Residential/appliances Residential/space heat heaters) , homeowners and renters (tank wrap and heat traps) Appliance buyers Homeowners, renters Trade Ally, Customer Education Customer Education LL Program Step B. D. E. Marketing Activity Produce media advertisements that des- cribe recommended measures for existing buildings, give probable savings in Juneau for each measure in ad, and list phone number for more information. Ads should emphasize increased comfort that will result from improved insulation and less infiltration. Testimonials from local residents should also be useful. Contact insulation vendors and contrac- tors that do work on existing homes and inform them of AEL&P's recommendations about energy-efficient insulation lev- els. Pamphlets should be provided to vendors and contractors to give to their customers. Inform commercial HVAC and electrical contractors about AEL&P's recommenda- tions and provide with pamphlets to give to their customers. Institute a certification program for existing homes that is modeled after new-home certification strategy in Step 3 above. Begin approximately 1 year after new-home program. Hold residential and commercial work- shops on how to install conservation measures in existing buildings. Table 25 (continued) Sector/End Use Residential/space heat Residential/space heat Commercial, office, retail, other/HVAC Residential/space heat Residential and Commercial/space heat, water heat Target Groups Homeowners, renters Homeowners, renters Building owners, tenants Homeowners, resale home buyers Homeowner, renters, building managers Information Approach Advertising Trade Ally Trade Ally All Direct Contact 8L Program Step 7. Commercial Audits (Phase 3) G. A. Marketing Activity Contact vendors of commercial lighting equipment to develop joint promotional activities for energy-efficient lighting products (e.g., joint advertising). For example, AEL&P could provide informa- tional pamphlets while the vendor pro- vides promotional pricing. Offer commercial audits on a trial basis to the 50 largest commercial accounts. Table 25 (continued) Sector/End Use Commercial, office, retail, other/lighting Commercial, office, retail, other/HVAC Target Groups Building owners, tenants Building owners Information Approach Trade Ally Direct Contact have changed so that the measures are no longer cost-effective. Promotion of dual-fuel service is currently AEL&P's primary conservation concern. The service and associated reduced rate should be promoted as soon as possible to conserve potential energy sup- plies from being lost through water spillage and increase wholesale revenues to APA, which will reduce the need for a wholesale rate increase to AEL&P. Therefore, Step 1 in Table 25 combines activities to market the dual-fuel rate with a few other program startup activities that will set the stage for later conservation marketing activities. When forecasts of load growth show that a new gen- eration resource, such as Dorothy Lake, will be needed within several years, AEL&P will enter Phase 3 of its program. This phase will begin with promotion of conservation measures that will result in more efficient use, and in reductions in use, of electric energy and thus delay the need for new generation. Step 3 in Table 25 comprises the startup activities for the conservation program. As soon as they are economically justifiable, con- servation measures should be installed in new con- struction to prevent (1) "lost opportunities" for conservation or (2) the need for future retrofits. But implementation of this step too early (i.e., during Phases 1 or 2 of AEL&P's energy supply con- ditions) will fail the no-losers test. Therefore, Step 4, which focuses on single-family home con- struction, is shown in Table 25 as a Phase 3 step. It might also be appropriate during earlier phases if AEL&P believes that avoiding lost opportunities for conservation is more important than strict adherence to the no-losers test. As with new construction, focusing as early as possible on the adoption of energy-efficient water heaters and appliances will prevent lost or de- layed opportunities for conservation. Therefore, in Step 5, water heaters and appliances immediate- ly follow new construction in priority. The experience of other utilities shows that some conservation marketing activities will yield more conservation per program dollar spent than will other activities. A new-home certification pro- gram, for example, probably will result in more conservation per dollar spent on this activity 79 than will providing energy audits to AEL&P's 50 largest commercial customers. Thus, commercial audits are a lower priority activity, Step 7 in the program. ° It is desirable to focus a program step on a par- ticular sector and end use. By doing so, AEL&P will be able to concentrate through a variety of information media on the small number of target groups associated with a particular sector and end use, thereby increasing the probability that a target group will conserve. Step 4, for example, focuses on new-home buyers with three marketing activities designed to induce them to buy energy- efficient homes. This comprehensive approach, which addresses them directly, as well as through homebuilders and realtors, is more likely to suc- ceed than would a limited appeal just to home buyers. ° The activities and steps were designed so that one full-time equivalent (FTE) AEL&P staff member can implement them with the assistance of the utility's media and conservation program consultants. MONITORING THE INSTALLATION OF CONSERVATION MEASURES AEL&P and its local media consultant will want to determine how well their information program works in inducing custom- ers to install conservation measures. Conservation program staff will also want to know how much energy their customers are saving as a result of the program. This section con- tains techniques that program staff can use to determine the program's success in prompting customers to install conser- vation measures. The next section contains techniques for measuring the program's success in saving energy. Monitoring AEL&P's success in promoting dual-fuel service will be relatively simple. Utility staff will merely have to count the number of customers who sign up for the service and begin paying the dual-fuel rate. In general, however, and particularly for the other conser- vation steps in Table 25 (Steps 3 through 7), AEL&P's in- formation program efforts will have to be experimental. There is little research information available on how well information alone, without accompanying financial incen- tives, works in inducing customers to adopt conservation measures. Therefore it is hard to predict penetration rates for conservation measures marketed with information alone. The lack of research data makes it even more important that AEL&P monitor its customers' response to the information program and make changes when they appear necessary. 80 We recommend that AEL&P begin this monitoring at the start of the energy conservation and management program. Utility staff, with the help of their media consultant, should convene a randomly selected focus group of customers and subsequently conduct a telephone survey, to find out (1) cus- tomers' awareness of AEL&P's energy conservation and manage- ment efforts to date (e.g., their awareness of and reaction to AEL&P's television spots and programs), (2) their belief in the information they have heard about conservation, and (3) how much conservation they have implemented in the last year. The focus group will be useful in helping staff pre- pare questions for the survey. At the start of the program, we recommend that staff also call appliance, water heater, and building materials dealers to find out the number (or approximate proportion) of energy- efficient appliances, water heaters, and building conserva- tion products (such as insulation and triple-pane windows) they have sold in the last year. This information from cus- tomers and dealers will give AEL&P a "baseline" of recent conservation activities, against which the results of future focus groups and telephone surveys can be compared. These surveys, each preceded by a focus group, should be repeated every 6 to 9 months with a standard set of questions, along with other questions that might emerge from a particular focus group. Another type of program monitoring will involve careful rec- ordkeeping by program staff who would, for example, record the number of calls received from customers for conservation information, count the number of new houses being built to meet conservation standards, record the number of speeches or workshops given by conservation staff, and record the number of people who attend these events. A third form of monitoring will be the "pilot testing" of information media before it is fully implemented. For exam- ple, a pasteup brochure or the proposed program logo might be shown to a focus group, or a small run of brochures might be distributed for customer reaction before a full-scale printing, while revisions are still easy to make. MEASURING ENERGY SAVED THROUGH CONSERVATION How much energy will AEL&P's energy conservation program save? The Brookings Institution recently analyzed the re- search that has been done on measuring the energy saved by energy conservation programs in the United States. Through their analysis, Brookings authors Robert Hemphill and Edward Meyers found that most conservation programs "work," in the rudimentary sense of the word. People who receive utility-sponsored information 81 use it to take conservation actions, and they take more actions than people who do not receive the information. Anywhere between 30 and 77 percent of the recommended actions are carried out, with those that are cheaper and have shorter paybacks dominating. Second, these actions do result in overall average saving. Electric heating custom- ers who participated in seven conservation pro- grams in the Pacific Northwest are estimated to have saved from 1,500 to 7,000 kilowatt hours a year, the equivalent of 10 to 20 percent of aver- age annual consumption. (Reference 6-5) To estimate the energy savings due to Steps 3 through 7 of AEL&P's program, it will be necessary to randomly survey AEL&P's customers after the program has been under way for approximately 1-1/2 to 2 years (long enough for a sizable number of customers to have adopted a conservation measure at least a year before the survey). The following proce- dures would go into such a survey: 1. 2. Draw a random sample of 200 customers. Survey these customers by telephone to find out which ones have taken a conservation action because of AEL&P's conservation information. (This telephone sur- vey should also include questions necessary for the marketing program monitoring described under "Program Monitoring" above.) From the survey responses, divide those surveyed into two groups: conservation program participants (those who have adopted a conservation measure) and nonpartic- ipants. For statistical validity, the participant group will have to comprise at least 50 respondents. For each member of the participant group, we recommend that AEL&P obtain billing histories for the year before and the year after the date that each participant adopted a conservation measure. For the nonpartici- pants, AEL&P should obtain 2 years of continuous bill- ing data that cover approximately the same period as the average 2 years of data for participants. The data for participants and nonparticipants should be statistically analyzed and compared to determine wheth- er participants' energy consumption was significantly lower than nonparticipants'. Actual energy savings due to the conservation information program might or might not show up through this survey. Research has shown that "confounding" factors make it dif- ficult, with a limited survey, to isolate and measure the effects of conservation information on customer behavior. 82 Confounding factors can include rising electricity prices, variation in appliance stock, "thermostat creep" (the pro- pensity of occupants to raise indoor temperatures after a home has been weatherized), and other behavior differences between participants and nonparticipants. Nevertheless, it would be useful for AEL&P to attempt these measurements, and doing so should be inexpensive if it is combined with the survey of marketing program effectiveness. CHANCES FOR PROGRAM SUCCESS Research has shown that the motivation and enthusiasm of utility staff have much to do with the success of conserva- tion programs. Another predictor of success is the compo- sition of the utility's service population. The larger the proportion of home-owning, higher-income, well-educated cus- tomers a utility has, the higher the penetration rates will probably be for utility-sponsored conservation measures. Juneau's population is well above the national average in both income and education. For example, 1980 census figures show that Juneau had a median family income of $35,786, nearly twice the national median of $19,917, and that nearly 40 percent of Juneau's population had completed 4 or more years of college, versus a national average of less than 20 percent. A large portion of Juneau residents own their own homes and are "do-it-yourselfers," the city has a small homogenous population, customers tend to have a favorable attitude toward AEL&P, and many customers know AEL&P employ- ees. These characteristics all should help AEL&P's conser- vation program succeed. Besides the Brookings research noted above, there is little research information available on the market penetration of conservation measures promoted through information alone and without accompanying financial incentives. Experience indi- cates, however, that the following penetrations should be feasible targets for the measures in AEL&P's program: ° 80 percent participation for measures with a pay- back period of less than 1 year ° 60 percent participation of measyres with a pay- back period of less than 2 years ° 20 percent participation of measures with a pay- back period of less than 4 years ° Less than 5 percent participation for measures with a payback period of more than 5 years Because Juneau is an especially favorable setting for an information-only campaign, AEL&P's customers might well sur- pass these participation rates. 83 REFERENCES 6-1. Wayne, Mary. Understanding the Customer. EPRI Jour- nal. Electric Power Research Institute. October 1986. p. ll. 6-2. Electric Power Research Institute. Marketing Demand- Side Programs to Improve Load Factor, Volume 2: A Synthesis of Utility Experience. EA-4267. Prepared by Synergic Re- sources Corporation. October 1985. p. 6-3 and 6-8. 6-3. EPRI, EA-4267, p. 6-12. 6-4. EPRI, EA-4267, p. 6-17. 6-5. Sawhill, John C., and Richard Cotton, eds. Energy Conservation: Successes and Failures. Washington, D.C.: The Brookings Institution. 1986. 6-6. Wayne. EPRI Journal. October 1986. lepRI research indicates that "many older and low-income customers will not buy unless they can recover their capi- tal investment in two years or less" (Ref. 6-6). 84 Chapter 7 PROGRAM OBJECTIVES AND BUDGET As mentioned in Chapter 6, we designed the program activ- ities and steps in Table 25 so that one full-time equivalent staff member can implement them with the assistance of AEL&P's media and conservation program consultants. This approach, in contrast with the alternative approach of hav- ing the program conducted entirely by outside contractors, will yield three major benefits for AEL&P: ° It will capitalize on the substantial understand- ing the local staff has of the local community. ° It will enhance AEL&P's in-house conservation expertise, giving the utility a good basis for future demand-side management activities. ° It will save AEL&P much of the expense, such as travel and per diem costs, that results from hir- ing outside consultants. DUAL-FUEL AND CONSERVATION MARKETING OBJECTIVES To help AEL&P management and staff implement the program activities described in Chapter 6, we have prepared Tables 26 and 27, which list objectives and completion dates for the dual-fuel and energy conservation marketing programs. The activities listed in the tables are described more fully in Table 25 in Chapter 6. Table 26 is focused primarily on dual-fuel marketing objec- tives and indicates that most dual-fuel marketing and promo- tional activities should be completed by June 30, 1988. The completion dates for energy conservation objectives in Table 27 are given in terms of the end of a particular year prior to the time when energy-demand projections show that a new generation resource (beyond Crater Lake) will be needed unless conservation actions are taken. For example, the table schedules conservation startup activities for comple- tion by the end of the sixth year before the time when pro- jections show that a new resource will be needed unless demand growth is curbed through conservation. An early con- servation activity should be the adoption of conservation measures in AEL&P's buildings as an example of good conser- vation. Installing these measures will give AEL&P staff experience with conservation technology that will be useful 85 during later conservation activities, and will reinforce the utility's role as a leader in energy conservation for the community. PROGRAM COSTS The estimated annual cost of these activities is summarized in Table 28. Though AEL&P's marketing activities will change from year to year, the labor, media, consultant assistance, and other costs of the dual-fuel and conservation programs will be similar from year to year, making it possible to discuss program costs in terms of the estimated annual cost itemized in Table 28. To conduct the program without hiring new staff, AEL&P should employ the services of its media consultant for the tasks of information media production and placement, and assistance with general program management and implementation. From our knowledge of media production, placement, and consulting costs in Juneau, we estimate that an ultimate annual budget of $50,000 will be necessary to cover media production, placement, and consulting costs. We also recommend that AEL&P's principal energy conservation and management staff member visit other utilities that have implemented conservation programs and other forms of demand- side management. For example, Otter Tail Power Company, from whom AEL&P staff already have obtained information use- ful for AEL&P's load management program, has implemented a progressive conservation program. Visiting the staff of this program and several others would give AEL&P staff invaluable help in the implementation of conservation meas- ures. Therefore, we recommend an annual travel and investi- gation budget of approximately $3,000, which is shown in Table 28 as part of an ultimate total budget of $15,000 for travel, supplies, and miscellaneous program expenses. The survey preparation, performance, and analysis necessary to monitor the effectiveness of the marketing program and estimate the energy saving due to the program will cost ap- proximately $5,000 per year, which is divided between AEL&P staff costs and miscellaneous expenses in Table 28. In addition, we recommend an ultimate budget of $10,000 for as-needed program consulting services, bringing ultimate total program cost to approximately $138,000 per year. Our research has shown that it is difficult to determine what other utilities of AEL&P's size are spending on their conservation programs. Programs and their accounting prac- tices vary greatly among utilities; and most programs in- clude financial incentives, which substantially alter the nature and cost of their marketing activities. These 86 factors make calculation of meaningful "average" program marketing budget nearly impossible. Our recommended program activities and labor allocation, however, are based on our experience with many small and medium-size utilities. The level of effort we recommend is typical for a utility of AEL&P's size. 87 Table 26 DUAL-FUEL MARKETING OBJECTIVES Completion Activities From Date Action Table 25 Dec 31, 1987 Dual-Fuel Startup Step ]: A, B, C, Dey Beek aC pohly, Dual-Fuel Task Force Step 2: A, D June 30, 1988 Dual-Fuel Trade-Ally Step 2: Boy, Ec Cooperation and Media Advertising a Dec 31, 1988 Initial survey to w/a> monitor installation of conservation meas- ures (to get baseline data from focus group, telephone survey, and dealers) June 30, 1990 First triennial up- n/ac date of energy conservation plan fan ongoing activity that should be under way by given date. DSee the section of Chapter 6 titled "Monitoring the In- stallation of Conservation Measures" for description of periodic monitoring surveys: After initial baseline moni- toring, subsequent monitoring surveys should be done every 6 to 9 months after Step 3 activities begin. “conservation plan should be updated every 3 years. The first update should include a forecast of how much energy will be saved each year through conservation measures. 88 Table 27 ENERGY CONSERVATION MARKETING OBJECTIVES Completion Date (End of Year Prior to Pro- jected Need For New Generation Conservation Step Resources) from Table 25 Activities from Table 25 . b .b bb 6 Conservation Startup Step 3: A,B,C ,D ,E,F,G, H ,I 7 b b 5 New Construction Step 4: A ,B,C b 4 Water Heaters and Step 5: A,B Appliances aa Saag b _b Existing Buildings Step 6: A,B,C,D,E ,F ,G 3 Commercial Audits Step 7: A ®after completion of the Crater Lake project. An ongoing activity that should be under way by end of given year. Notes: Triennial updates of conservation plan should occur by June 30, 1990 (see Table 26) and every 3 years thereafter in conjunction with implementation of conservation steps in this table. Surveys to monitor installation of conservation measures should occur every 6 to 9 months as described in Table 26. 89 Table 28 . ESTIMATED ANNUAL COST OF AEL&P'S ENERGY CONSERVATION AND MANAGEMENT PROGRAM Annual Costs (S$) b 1990 and Cost Category 1987° 1988 1989 Beyond AEL&P Staff 42,000 47,000 63,000° 63,000 Media Production and Placement 21,000 24,000 32,000 32,000 Consultant Fees Media Consultant 12,000 14,000 18,000 18,000 Program Consultant 7,000 8,000 10,000 10,000 Travel, supplies, miscellaneous expenses 10,000 11,000 15,000 15,000 TOTAL 92,000 104,000 138,000 138,000 #1987 cost assumes two-thirds of ultimate program effort. Pose cost assumes three-quarters of ultimate program effort. “one full-time equivalent staff person's labor at an average salary of $45,000 plus 40 percent for fringe benefits and direct costs. Excludes administrative overhead. Gestimated to equal 12 percent of all other costs. Includes expenses for activities such as mailing of annual letters to customers informing them of their energy use for the last 12 months (approximately $5,000) and travel costs for staff investigation of other utilities' programs ($3,000) . Notes: All costs are in 1987 dollars. The annual costs for 1989 and later years of the program assume that conservation marketing activities outlined in Table 27 will begin soon after dual-fuel marketing activities are completed in 1988. If there is a sig- nificant delay in the need for conservation, the annual costs for 1989 and later years will be less than shown. 90 Appendix A it; Munber of Custosers ond Floor Aree Residential Cless General Hot Water All Electric) Totel All Electric, New All Electric, Existing Commercial Squere Footege Office Retail Education Trensportetion, Cove, and Utilities (TCU) Other Total fomeal kWh Use/Custoser Residential Cless—by end Generel Spece Heet fppliances Other Totel Mot Woter . Spece Heat Water Heat fopliences Other Total All Electric--ew Space Heat Water Heat fopliences Other Total (ectwel) anne 1987 22% 0 2 2744769 1502101 943795 238975 325931 S755571 4240 1m 2516 4240 4240 1775 12771 4379 215 7837 542 2295 275284 1306516 9569 239677 326889 5772487 Sm 4373 1827 6791 2005 4222 4222 1768 12716 3868 1622 17827 Table A-1 ALASKA ELECTRIC LIGHT AND POWER COMPANY RETAIL SALES FORECAST BASED ON END-USE PATTERNS 1986 4463 2145 3005 710 225 2821551 1544121 970197 243660 335049 5916578 590 4370 1825 6786 205 4221 4721 1767 12713 842 3866 3866 1621 17815 1987 4540 2164 N01 806 2295 2893387 1583434 994898 251915 MIS 6067212 bd 4361 1822 6771 2499 42ii 421 1763 12685 8458 3864 3864 1620 17806 4638 2183 3180 885 2295 2968228 1624391 1020632 258431 352466 6224148 589 4358 1820 6767 202 4216 4216 1765 12699 8452 3861 3861 1619 17794 1989 4758 2203 29 4 3043632 1665657 1046560 264996 YA 6382264 587 4347 1816 6750 73 4219 4219 1766 12708 8450 3860 3860 1619 17789 1990 4901 2223 3280 985 2295 3121863 1708469 1073460 271807 370709 6546308 586 asa 1613 6740 B05 4222 4222 1768 12716 8436 3854 354 1616 17761 1991 5044 2245 3322 1027 2295 3202263 1752469 1101105 278807 300257 6714901 584 4322 1005 o7it 2502 4216 4216 1765 12699 8572 3916 3916 1642 19047 1992 Sit 2266 345 1070 2295 3284734 1797602 1129463 285987 6887835 381 4304 1798 6683 498 4211 42ii 1763 12683 eit 3979 3979 1669 18338 1993 52 2288 3408 1113 205 349328 1843897 1158551 293353 7065224 579 4285 1790 664 2095 4205 4205 1761 12666 851 4044 waa 169 18634 1994 2310 3452 137 56101 1891304 1188388 N07 7247181 57% 4267 1782 6626 292 an uy 1738 12649 0994 a0 4109 1723 10934 2332 346 1201 345109 1940093 1218994 7433824 374 an 1773 6598 89 41 av 1756 12632 0342 38% 3820 1602 17603 3817 2356 sua 1248 436147 1989916 1250297 M6583 431779 7624722 st 4224 1765 6560 4188 4188 1733 12614 340 3810 3810 1598 17557 1997 5979 2370 3590 1295 25 3729522 2041016 1282405 324713 442867 7820523 367 4200 1734 2481 4182 4182 1731 12596 e318 1594 17512 6147 2403 438 1343 295 3825275 2093427 1315336 333052 454239 8021351 417% 1744 6484 un 41% 1% 174 12578 02% ye 1589 17466 1999 619 2477 87 1392 25 3923827 2147188 1349114 M1604 465904 8227397 él 4152 174 6447 2474 417% “7% Vuh 12560 8275 so 780 1585 17420 6496 2451 v% 141 295 4024282 202327 1383759 590577 477868 BasROIS 4128 1724 5409 an 4164 4164 Way 12542 8253 5/70 yn 1581 17375 ' Table A-1 (continued) 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 19% 1997 1998 1999 2000 (ectuel) All Electric--Existing Space Heat 111% 10992 10984 10978 10971 10968 10951 11127 11307 11489 11674 10854 10825 10797 10769 10741 10713 Water Heat 318 3067 3865 3863 3860 3859 3853 3915 3978 4042 4108 3e19 oor yn ye yon 9 (pp liences m8 3067 3865 3863 3860 59 3853 WS 3978 42 4108 wy 380? on” ve yn ye Other 1650 1628 1627 1626 1625 1625 1622 1648 1675 1702 17% 1608 1604 1600 1595 15vt 1587 Total 20623 20355 2041 20330 20317 20311 20279 20606 20938 21276 21619 my 20047 19995 19942 19890 19838 Commerc iel Class--by end use (UD per squ..+ Foot) Office HVAC, Heat 19.168 19,168 = 19.360 19,553 19.749 19,946 20,146 = 20,347 20,551 20.756 = 20.964 = 20,173 21-385 21.597 = 21,815 22,033 22.253 WAC, Monheat 5.258 3.258 Sait 5.364 5.417 5.471 3.526 5.581 3.637 5.694 5.751 5.808 5.866 5,92 3.984 6.044 6.104 Lights 7A 7A 7.104 7.256 7.329 7,402 7.476 7.551 7.626 7.702 2779 7,857 7.936 8.015 8,095 8.176 8.258 Other 2.840 2.840 2,868 2.897 2.926 2,955 2.985 3,015 3,045 3.075 3,106 wiv 3,168 3,200 3.22 nos $297 Retail HVAC, Heat 11.051 11,051 116162) 116273106386 11,500 0,615 16731 10,848 11,967 12,086 = 12.207 12,328 12,453 12577 12.703 12.890 WAC, Honheat 3.551 3.551 3.607 5.663 5.719 5.776 5.834 5.892 3.951 6.011 6,071 6.132 6.193 6.255 6318 6.381 6.445 Lights 7.423 7,423 7.497 7.572 7.648 7.724 7,802 7.880 7.958 8.038 8.118 8.200 8.282 8,364 6.448 6.5353 0.618 Other 3.102 3.102 5.153 5.205 3.257 5.309 5.362 5.416 35.470 5.525 5.580 3.6% 3.692 3.749 3.807 3.8465 5.923 Education HVAC, Heat 15.587 15,587 15.743 15.900 16.059 = 14.220 16.382 16.546 = 16.711 16.878 = 17.047 17,218) 17.390 17,564 17.739 17.917 18.0% HVAC, Wonheat 0.939 = 0.939 0,948 (0.958 0.967 (0.977 0.987 0,997 1,007 1,017 1,027 1.077 1,048 1,058 1.0... “939 1,090 Lights 3.817 3.817 3.855 3.894 3.933 3.972 4.012 4.052 4,092 4.133 4175 4.216 4.259 4.301 4.304 4,388 44 Other 3.909 3.909 3948 3.988 4,027 4.068 4.108 aay 4AM 4.233 4.275 ae 43 4.405 an 4,493 4.538 TCU HVAC, Heat 18.244 18.244 18.426 = 18.611 18.797 18.985 19.175 19.366 = 19.560 19,756 = 19,953 20.153 20,354 20,558 20.763 «20,971 211 WAC, Honheat 3.302 3.302 3335 3368 3.402 34 3.470 3.505 3.540 3576 36 3,647 3.604 3.721 378 3.7% 5.834 Lights 6.660 6.660 6.727 6.794 6.862 6.930 7,000 7,070 7.140 7.212 7.284 7.337 7.4” 7.505 7.500 7.635 7,732 Other 4.822 4,822 4,870 ay 4.968 5.018 5.068 Se 5.170 5.222 5.274 3.326 3.380 3.44 3.488 35.543 5.598 Other HVAC, Heat, 10.698 = 10.698 = 10.005 = 10,913 14.022, 106132116244 106556 10470 11,584 11,700 10,817) 10,933 12,055 120175 12,297) 12,40 HVAC, Monheat 2.540 2.540 2.565 2.591 2.617 2.643 2.670 2.696 2.723 2.750 2.77% 2,806 2.8% 2,862 2.891 2,920 299 Lights 6.660 6.660 6.727 6.794 6.862 6.930 7.000 7,070 7.140 7.212 7,284 7.357 7.4” 7.505 7.500 7.655 7.732 Other 2.983 2,983 3,013 3,043 3,073 3,104 3135 34167 3198 3.2% 3,262 125 L308 3M 335 a 3.463 3, fnnwel Ah Use (000) Residential Cless—using End Use Forerast, General 27613 2738 287 woe 1385 32117 33032 33850 34689 35548 36429-37332 SBI 30996 = 39856 40734 41633 Hot Water 75376 = 26901 27267 27450 27725 27999 28274 28507 28743 28981 7221 77463 ais 29969 02235 30483 10704 All Electric--New 0 9653 12646 14350 15741 16794 17499 18441 19622 20743 21906 21146 21910 22681 259 24244 75036 ALL Electric--Existing 47330 46714 46683 46658 46626 46613 46540 any 48053 48828 49616 46128 46008 5888 45768 45648 Une Subtotal 100319 = 113006 = 116882119203 121476 = 123523. 125344 = 128187 = 131108 = 134101 137172 134069) =—:135788 = 137534 139308) 141110 = 142942 Coasercial Class--using End Use Forecast Office 51296 51445 0238 55160 37153 S919 61319 63527 65815 68185 70640 73184 75814 78539 81361 84285 87314 Retail wy 29303 30335 wae 32553 yi 34927 3OIRd y74e7 38837 02M 41685 43183 73s 32 48008 49733 Education 11634 11668 12079 12511 12963 13425 13908 14408 14927 15465 16022 16599 17195 17813 18453 19116 19803 Transportation, Coss, 4426 4439 4595 4759 43 5107 5290 S481 5678 5883 6095 6314 6541 6776 7020 Ve 133 and Utilities (TCU) Other 4636 4649 4813 4985 ‘5165 53g S541 S7a 5948 6162 6384 6614 6851 7098 7353 7617 7791 E~” ' Table aA-1 (continued) 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 19% 197 1998 1999 2000 (actual) Subtotel 101208 = 101506 = 105080108833 «412764 = 116785 120985125342 129AS6 = 134532139377 144398 1495S 154960 = 1460579 1464798 = 172274 Dusk to Dawn Lighting M171 1174 1216 1259 1305 1351 1400 1450 1502 1557 14i3 1671 m9 1793 1857 1924 ivy Industrie] 1189 1039 1076 a4 1155 119% 1239 1284 1330 1378 1427 1479 1332 1387 1644 1703 1764 Subtotel 103568 = 103720107372, 111207115224 ANVS32 123624128076 132688 = 137466 142416 ATS 152847 138348140 149975176031 4. Totel Sales (000 kun) Original Forecest 204111 = 21831922 232685 «239181 245495251717 SPI7L = 26864 = 278803 «= 283002 FTL = 272072299432, 7019 314840 = 322904 End Use Forecast 203887 «216726 = 224254 = 230407 = 236700 247855 248968 = 256265 = 263775 = 271567 «= 279588 = 281614 = 288635 275874 = 3338 SN0TS. Stu Appendix B Table B-1 ALASKA ELECTRIC LIGHT AND POWER COMPANY CONSERVATION MEASURES EVALUATED NEW SINGLE-FAMILY AND MULTIFAMILY RESIDENTIAL Double Glazing to Triple Glazing--Install triple- glazed, thermally broken windows instead of double-glazed. Insulated Doors--Install insulated entry doors. Ceiling (Roof) R30 to R38 Standard--Increase ceiling insulation from R30 to R38 without roof trusses. Floor R19 to R30--Increase underfloor insulation from R19 to R30. Infiltration 0.6 to 0.3 Air Changes Per Hour (ACH) --Select "air-tightening" techniques and air-to-air heat exchanger to reduce infiltration from 0.6 to 0.3 air changes per hour. Wall R19 to R25--Increase exterior wall insula- tion from R19 to R25. Ceiling (Roof) R38 to R49 Advanced--Increase ceiling insulation from R38 to R49, using roof trusses to allow insulation to extend over the outside wall. Improved Insulation and Heat Traps--Install new hot water tank with R-20 insulation and heat traps. Data are given for savings for the two relevant AEL&P rates: Rate 12 for hot-water-only customers and Rate 13 for all-electric customers. Flow Restrictors--Install flow restrictors in showerheads. Estimated electricity savings are zero because available evidence indicates that consumer response offsets the technical savings of flow restrictors (See A Conditional Demand Study of the Direct Weatherization Assistance Program prepared for San Diego Gas and Electric Com- pany (Ref. III-7)). Heat Pump (Single-Family Only)--Install heat pump instead of a central forced-air system. EXISTING SINGLE-FAMILY RESIDENTIAL Ceiling RO to R19--Install R19 insulation in ceiling. Walls RO to R19--Install R11 insulation in ex- terior walls. Floor RO to R19--Install R19 insulation in crawl space. Ceiling R19 to R30--Upgrade ceiling insulation to R30 from R19. Single-Triple Glass--Replace single-pane windows with triple-pane windows. Ceiling R30 to R38--Upgrade ceiling insulation to R38 from R30. Floor R19 to R30--Upgrade insulation in crawl space to R30 from R19. Wood to Metal Doors--Replace wood doors with metal doors. Water Heater Blanket and Beat Traps--Wrap water heater in 2-inch thick blanket and install heat traps. Data are given for savings for the two relevant AEL&P rates: Rate 12 for hot-water-only customers and Rate 13 for all-electric customers. Flow Restrictors--Install flow restrictors in all showerheads. See description under flow restric- tors for New Single-Family and Multifamily Dwell- ings, above, for an explanation of the estimate of no savings. Heat Pump--Install a heat pump in existing home. EXISTING MULTIFAMILY RESIDENTIAL Walls RO to R11--Install R11 insulation in exter- ior walls. Ceiling RO to R38--Install R38 insulation in ceil- ing of upper story. Floor RO to R38--Install R38 insulation in crawl space. > Glass From One to Two Panes--Replace single-pane windows with double-pane windows. Doors R2 to R15--Replace standard entry doors with doors of resistance R15. Glass From Two to Three Panes--Add additional pane to double-pane windows. (Data were not available to examine addition of a pane to single-pane windows.) Water Heater Blanket and Heat Traps--Wrap water heater in 2-inch-thick blanket and install heat traps. Data are given for savings for the two relevant AEL&P rates: Rate 12 for hot-water-only customers and Rate 13 for all-electric customers. Flow Restrictors--Install flow restrictors in all showerheads. See description under flow restric- tors for New Single-Family and Multifamily Dwell- ings for an explanation of the estimate of no savings. RESIDENTIAL APPLIANCES Frost-free refrigerator, moderate efficiency (energy factor = 6.0)--Replace fiberglass insula- tion with foam insulation and add insulation to the refrigerator door. Frost-free refrigerator, high efficiency (energy factor = 7.6)--Refrigerator of moderate efficiency plus antisweat switch, high-efficiency compressor, and increased gasket material in the freezer area. Manual defrost refrigerator, moderate efficiency (energy factor = 8.0)--Replace fiberglass insula- tion with foam insulation and add insulation to the refrigerator door. Manual defrost refrigerator, high efficiency (energy factor = 10.0)--Moderate-efficiency re- frigerator plus high-efficiency compressor and increased gasket material in the freezer area. Manual defrost freezer, foam insulation (energy factor = 10.4)--Replace fiberglass cabinet and door insulation with foam insulation. Manual defrost freezer, high-efficiency compressor (energy factor = 13.1)--Freezer with foam insula- tion as above plus high-efficiency compressor. aa Clothes dryer, 100 percent saturation of moisture sensors (energy factor = 3.0)--Addition of mois- ture sensors that turn off the dryer when clothes are dry. Clothes washer, reduced hot water usage--Reduce water usage in clothes washer by 30 percent, re- ducing electricity use required to heat water. Dishwasher, reduced hot water usage--Reduce hot water usage of dishwashers by 30 percent, reducing electricity use required to heat water. COMMERCIAL SECTOR Temperature Setback--Install automatic night set- back thermostats. Set temperature back 10 degrees at night. Wall Insulation--Insulate walls with R-13 cellu- lose insulation. ‘ Ceiling Insulation--Insulate ceiling with R-30 cellulose insulation. ' Infiltration Control--Install weatherstripping, caulking, and other measures to decrease infiltration. Storm Windows--Add another layer of glass to all single-pane windows. Efficient Lights--Replace existing bulbs with efficient bulbs in all fixtures. Note: Table B-2 ALASKA ELECTRIC LIGHT AND POWER COMPANY CONSERVATION MEASURES NOT EVALUATED RESIDENTIAL SECTOR Ceiling insulation, R-60 Floor insulation, R-40 Reduced infiltration in existing homes Wall insulation above R-25 Thermostat setback, space heating The Northwest Power Planning Council argues that thermostats are raised after weatherization occurs, thus does not analyze this option Heat pump water heater (not included in Juneau Heat Pump Study) Water heat thermostat setback Radio control on water heater (turn off at night) COMMERCIAL SECTOR Wall insulation, R-19, R-30 Ceiling insulation, R-19, R-40 Substituting storm windows for double glazing Heat pump (not enough data in Juneau Heat Pump Study) Dual fuel for larger commercial buildings Information on these conservation measures was not available from secondary data sources. These measures need to be researched to develop estimates of capital cost and electricity savings. This research may or May not show the measures to be cost-effective for AEL&P and its customers. Appendix C Table C-1 BENEFIT-COST ANALYSIS SINGLE-FAMILY, NEW Measures Installed: 1987 nev??? to NPV to Customer NPV to, Society Customer Payback Utility End _Use Measure ($_ 1985) ($_1985) (years) ($_1985) Space Heat Double- to triple- 1.69/2.38 0.94 3.1 -0.47/0.22 (dollars per glazing sq ft per year) Insulated doors 0.18/0. 26 0.09 3.6 -0.05/0.02 Roof R30 to R38 0.07/0.12 0.01 6.9 -0.04/0.02 standard Floor R19 to R30 0.11/0.21 0.00 7.3 -0.07/0.03 0.6 to 0.3 air 0.54/1.09 -0.05 7.7 -0.37/0.17 changes per hour Wall R19 to R25 -0.02/0.14 70.19 11.3 -0.11/0.05 Roof R38 to R49 -0.04/0.04 -0.13 12.4 -0.06/0.03 advanced Install heat pump 7.40 4.21 0.9 0.56 instead of central forced air Water Heat (dollars per year) Rate 12 Improved tank 191/296 231 1.9 -148/-44 insulation and heat traps Rate 13 Improved tank 196/302 236 1.8 -151/-45 insulation and heat traps aypy = Net Present Value. >the NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). In the range of results reported, the smaller number reflects $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. Table C-2 BENEFIT-COST ANALYSIS SINGLE-FAMILY, EXISTING Measures Installed: nev? to Society End Use Measure ($_1985) Space Heat Ceiling RO to 19 10.03/13.07 (dollars per sq ft per year) Walls RO to 11 3.94/5.24 Floor RO to 19 1.61/2.33 Ceiling R19 to 30 0.61/0.86 Single-triple glass 1.49/2.36 Ceiling R30 to 38 0.07/0.12 Floor R19 to 30 0.15/0.27 Wood-metal doors -0.09/0.03 Install heat pump 4.63 Water Heat (dollars per year) Rate 12 Blanket and heat 158/232 traps Rate 13 Blanket and heat 161/236 traps @aypy = Net Present Value. 1987 NPV to Customer (s 1985) 6.73 2.53 0.83 0.34 0.54 0.01 0.02 -0.22 1.44 215 219 Customer Payback (years) 0.5 1.3 3.8 3.2 5.5 6.7 6.8 13.1 4.9 0.7 0.7 NPV to, Utility ($_1985) -2.08/0.95 -0.89/0.41 -0.49/0.22 -0.17/0.08 -0.60/0.27 -0.04/0.02 -0.08/0.04 -0.08/0.04 0.56 -122/-48 -124/-49 >the NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). In the range of results reported, the smaller number reflects $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. Table C-3 BENEFIT-COST ANALYSIS MULTIFAMILY, NEW Measures Installed: 1987 nev??? to NPV to Customer NPV to, Society Customer Payback Utility End Use Measure ($_1985) ($_1985) (years) ($_1985) Space Heat Double- to triple- 1.30/1.85 0.70 3.4 -0.38/0.17 (dollars per glazing sq ft per year) Ceiling R30 to R38 0.13/0.19 0.07 3.4 -0.04/0.02 standard Insulated door 0.09/0.13 0.05 3.8 -0.03/0.01 Floor R19 to 30 0.05/0.11 0.00 7.7 -0.04/0.02 0.6 to 0.3 air 0.32/0.86 -0.27 9.0 -0.37/0.17 changes per hour Walls R19 to 25 -0.05/0.02 -0.13 13.2 -0.05/0.02 Ceiling R38 to 49 -0.08/-0.05 -0.11 19.9 -0.02/0.01 advance Water Heat (dollars per year) Rate 12 Improved insulation 60/112 80 3.1 -73/-22 and heat traps Rate 13 Improved insulation 62/115 82 3.0 -74/-22 and heat traps aypy = Net Present Value. >the NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). In the range of results reported, the smaller number reflects $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. Table C-4 BENEFIT-COST ANALYSIS MULTIFAMILY, EXISTING Measures Installed: 1987 nev??? to NPV to Customer NPV to, Society Customer Payback Utility End Use Measure ($1985) ($_1985) (years) ($_1985) Space Heat Walls RO to R11 3.27/4.36 2.09 1.4 -0.74/0.34 (dollars per sq ft per year) Ceiling RO to R38 3.26/4.46 1.95 263) -0.82/0.38 Floor RO to R38 1.70/2.45 0.88 3.7 -0.51/0.24 Glass from single to 0.59/1.16 -0.02 7.6 -0.39/0.18 double panes Doors R2 to R15 -0.01/0.05 -0.07 11.4 -0.04/0.02 Glass from double to 7-0.72/-0.55 -0.91 24.2 -0.12/0.05 triple panes Water Heat (dollars per year) Rate 12 59/95 87 1.5 -59/-23 Blanket and heat traps Rate 13 Blanket and heat 61/96 88 1.5 -60/-23 traps @ypy = Net Present Value. Done NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). In the range of results reported, the smaller number reflects $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. End Use Frost-Free Refrigerator Manual Defrost Refrigerator Manual Defrost Freezer Clothes Dryer Clothes Washer Hot Water Usage Dishwasher Hot Water Usage aNPV = Net Present Value. Pthe NPV to society and to the utility reflects a range $0.00 per kWh to $0.03 per kWh ($ 1985). Table C-5 BENEFIT-COST ANALYSIS RESIDENTIAL APPLIANCES Measures Installed: 1987 nev??? to NPV to Customer NPV to, Society Customer Payback Utility Measure ($_1985) ($_1985) (years) ($_1985) Moderate efficiency 237/314 198 1.0 -83/-6 (Energy Factor = 6.0) High efficiency 144/193 119 1.3 -53/-4 (Energy Factor = 7.6) Moderate efficiency 6G 110/150 90 1.6 -43/-3 (Energy Factor = 8.0) High efficiency 63/87 51 Jaa -26/-2 (Energy Factor = 10.0) Foam insulation 247/326 202 1.0 -84/-5 (Energy Factor = 10.4) High efficiency 118/155 97 0.7 -39/-3 compressor (Energy Factor = 13.1) 100% saturation of -6/0 “6 8.6 -7/-1 moisture Sensors (Energy Factor = 3.0) Reduced hot water usage 24/45 36 2.8 -32/-11 Reduced hot water usage 52/83 69 1.9 -48/-16 in transmission and distribution (T&D) costs of In the range of results reported, the smaller number reflects $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. CRergy Factor = corrected volume (cubic feet) /daily power consumption (kWh/day). End Use OFFICE HVAC Lights RETAIL HVAC Lights OTHER HVAC Lights Measures Installed: Measure Temperature setback Wall insulation Ceiling insulation Infiltration control Storm windows Efficient lights Temperature setback Wall insulation Ceiling insulation Infiltration control Storm windows Efficient lights Temperature setback Wall insulation Ceiling insulation Infiltration control Storm windows Efficient lights @ypV = Net Present Value. >the NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). Table C-6 BENEFIT-COST ANALYSIS COMMERCIAL SECTOR nev? to Society ($_1985) 3.73/5.13 1.51/2.09 1.05/1.46 -0.07/0.07 -0.66/-0.24 0.41/0.59 2.00/2.76 1.37/1.94 1.30/1.78 0.04/0.21 -0.47/-0.14 0.43/0.62 2.79/3.85 1.50/2.10 1.26/1.72 0.01/0.17 -0.54/-0.16 0.42/0.61 1987 NPV to Customer {3 1985) 2.13 0.26 0.18 -0.23 71.54 0.55 1.13 0.15 0.28 -0.14 ele19 0.57 1.59 0.23 0.26 -0.17 "1.35 0.56 $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. Customer Payback (years) 0.2 2.9 2.9 8.4 16.6 0.4 0.3 3.5 2.4 6.5 16.0 0.4 0.2 3.1 2.5 7.0 16.1 0.4 NPV to, Utility ($_1985) -0.46/0.94 -0.06/0.53 -0.04/0.37 -0.05/0.10 -0.04/0.37 -0.22/-0.04 -0.25/0.51 -0.06/0.51 -0.05/0. 43 -0.05/0.11 -0.03/0.30 -0.24/-0.04 -0.35/0.71 -0.06/0.54 -0.04/0.42 -0.05/0.11 -0.04/0.35 -0.23/-0.04 In the range of results reported, the smaller number reflects Table C-7 BENEFIT-COST ANALYSIS STREETLIGHTS Measures Installed: 1987 nev?" to NPV toy, Society Utility End Use Measure ($ 1985) ($ 1985) Streetlights From 175W to 100W 67/127 a7 High-pressure sodium (capital cost $190-150 and transmission and distribution = 3¢/kWh) From 175W to 100W 18/60 -12 High-pressure sodium (capital cost $190-150 and transmission and distribution = 0¢/kWh) @ypv = Net Present Value. The NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh. End Use Space Heat (dollars per sq ft per year) Water Heat (dollars per year) Rate 12 Rate 13 apy = Net Present Value. Table C-8 BENEFIT-COST ANALYSIS SINGLE-FAMILY, NEW Measures Installed: Measure Double- to triple- glazing Insulated doors Roof R30 to R38 standard Floor R19 to R30 0.6 to 0.3 air changes per hour Wall R19 to R25 Roof R38 to R49 advanced Install heat pump instead of central forced air Improved tank insulation and heat traps Improved tank insulation and heat traps nev??? to Society ($ 1985) 2.39/3.04 0.26/0.33 0.12/0.18 0.21/0.30 1.09/1.60 0.14/0.29 0.04/0.12 9.48 340/445 347/453 1993 NPV to Customer ($_1985) 1.07 0.11 0.02 0.02 0.05 -0.17 0.11 4.61 250 256 Customer Payback (years) 3.6 4.1 7.8 8.3 8.8 12.8 14.1 1.1 2.0 2.0 NPV to, Utility ($1985) -0.04/0.61 -0.004/0.07 -0.003/0.05 -0.01/0.09 -0.03/0.48 -0.01/0.14 -0.004/0.07 1.81 -33/71 34/72 >the NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. In the range of results reported, the smaller number reflects End Use Space Heat (dollars per sq ft per year) Water Heat (dollars per year) Rate 12 Rate 13 @ypy = Net Present Value. Table C-9 BENEFIT-COST ANALYSIS SINGLE-FAMILY, EXISTING Measures Installed: Measure Ceiling RO to 19 Walls RO to 11 Floor RO to 19 Ceiling R19 to 30 Single-triple Glass Ceiling R30 to 38 Floor R19 to 30 Wood to metal doors Install heat pump Blanket and heat traps Blanket and heat traps nev?" to Society ($_1985) 13.10/15.94 5.26/6.47 2.34/3.01 0.87/1.10 2.37/3.18 0.12/0.17 0.27/0.38 0.04/0.15 6.71 276/350 281/356 1993 NPV to Customer ($_1985) 7.28 2.76 0.96 0.38 0.54 0.02 0.05 -0.19 1.84 228 232 Customer NPV to, Payback Utility (years) ($_1985) 0.5 -0.16/2.68 1.5 -0.07/1.14 4.3 -0.04/0.63 3.7 -0.01/0.22 6.3 -0.05/0.77 7.6 -0.003/0.05 tot -0.01/0.10 14.9 -0.01/0.11 5.6 1.81 0.8 -28/46 0.8 -28/47 >the NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. In the range of results reported, the smaller number reflects Table C-10 BENEFIT-COST ANALYSIS MULTIFAMILY, NEW Measures Installed: nev??? to Society End Use Measure ($_ 1985) Space Heat DG to TGTB 1.86/2.37 (dollars per sq ft per year) Ceiling R30 to R38 0.19/0.24 standard Insulated door 0.14/0.17 Floor R19 to R30 0.11/0.16 0.6 to 0.3 air 0.86/1.37 changes per hour Walls R19 to R25 0.02/0.08 Ceiling R38 to R49 -0.05/-0.03 advanced Water Heat (dollars per year) Rate 12 Improved insurance 134/185 and heat traps Rate 13 Improved insurance 137/189 aypy = Net Present Value. and heat traps 1993 NPV to Customer ($_1985) 0.80 0.08 0.06 0.01 -0.17 0.12 -0.11 89 92 Customer Payback (years) 3.9 3.8 4.3 8.8 11.3 15.1 22.7 3.4 3.3 NPV to, Utility ($_1985) -0.03/0.48 0.00/0.05 0.00/0.04 0.00/0.05 -0.03/0.47 0.00/0.06 0.00/0.03 -16/35 -17/36 Pme NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. In the range of results reported, the smaller number reflects — End Use Space Heat (dollars per sq ft per year) Water Heat (dollars per year) Rate 12 Rate 13 aypy = Net Present Value. Pthe NPV to society and to the utility reflects a $0.00 per kWh to $0.03 per kWh ($ 1985). Table C-11 BENEFIT-COST ANALYSIS MULTIFAMILY, EXISTING Measures Installed: Measure Walls RO to R11 Ceiling RO to R38 Floor RO to R38 Glass from single to double panes Doors R2 to R15 Glass from double to triple panes Blanket and heat traps Blanket and heat traps nev??? to Society —(S 1985) 4.37/5.39 4.47/5.60 2.46/3.16 1.17/1.69 0.05/0.10 -0.55/-0.39 116/151 118/154 1993 NPV to Customer ($_1985) 2.29 2.17 1.02 0.08 -0.06 -0.88 93 95 $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. Cc-11 Customer Payback (years) 1.6 13.0 27.6 1.6 1.6 NPV t peslity? ($_ 1985) -0.06/0.96 -0.06/1.06 -0.04/0.66 -0.03/0.50 0.00/0.05 -0.01/0.15 -13/22 714/23 range in transmission and distribution (T&D) costs of In the range of results reported, the smaller number reflects End Use Frost-Free Refrigerator Manual Defrost Refrigerator Manual Defrost Freezer Clothes Dryer Clothes Washer Hot Water Usage Dishwasher Hot Water Usage @Npv = Net Present Value. Table C-12 BENEFIT-COST ANALYSIS RESIDENTIAL Measures Installed: Measure Moderate efficiency a (Energy Factor = 6.0) High efficiency (Energy Factor = 7.6) Moderate efficiency (Energy Factor = 8.0) High efficiency (Energy Factor 10.0) Foam insulation (Energy Factor = 10.4) High efficiency compressor (Energy Factor = 13.1) 100% saturation of moisture sensors (Energy Factor = 3.0) Reduced hot water usage Reduced hot water usage nev??? to Society ($_ 1985) 328/400 202/248 157/194 91/114 339/412 161/195 2/8 56/77 99/131 1993 NPV to Customer {$_ 1985) 214 129 98 56 56 105 40 75 Customer Payback (years) 1.0 1.4 1.8 2.3 1.0 0.8 955 3.1 2.1 NPV to, utility? {§_ 1985) 725/47 -16/30 13/24 -8/15 -26/47 12/22 -2/4 -7/14 -11/21 Done NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). kWh T&D and the larger number reflects $0.03 per kWh T&D. °mergy Factor = corrected volume (cubic feet)/daily power consumption (kWh/day). In the range of results reported, the smaller number reflects $0.00 per End Use OFFICE HVAC Lights RETAIL HVAC Lights HVAC Lights Measure Temperature setback Wall insulation Ceiling insulation Infiltration control Storm Windows Efficient lights (Year installed: Temperature setback Wall insulation Ceiling insulation Infiltration control Storm windows Efficient lights (Year Installed: Temperature setback Wall insulation Ceiling insulation Infiltration control Storm windows Efficient lights (Year Installed: 1995) aypv = Net Present Value. Dine NPV to society and to the utility reflects a range in transmission and distribution (T&D) costs of $0.00 per kWh to $0.03 per kWh ($ 1985). $0.00 per kWh T&D and the larger number reflects $0.03 per kWh T&D. Table C-13 BENEFIT-COST ANALYSIS COMMERCIAL SECTOR Measures Installed: neve’? to Society ($_1985) 5.43/6.79 2.10/2.64 1.47/1.85 0.10/0.24 -0.24/0.15 0.81/0.99 1995) 2.92/3.67 1.94/2.48 1.78/2.23 0.24/0.40 -0.13/0.18 0.84/1.04 1995) 4.08/5.10 2.11/2.67 1.73/2.17 0.20/0.36 -0.15/0.20 0.83/1.02 NPV to Customer ($_1985) 2.12 0.26 0.18 0.23 1.54 0.48 1.12 0.15 0.28 -0.14 71.19 0.50 1.58 0.23 0.26 0.17 -1.36 0.49 1993 Customer Payback (years) 0.2 3.9 3.9 11.3 22.3 0.5 0.4 4.7 3.3 8.7 21.5 0.5 0.3 4.1 3.4 9.4 21.6 0.5 NPV t peslity? ($1985) 0.81/2.17 0.34/0.88 0.24/0.62 0.08/0.22 0.23/0.63 0.24/0.43 0.44/1.18 0.33/0.86 0.28/0.72 0.09/0.25 0.19/0.51 0.25/0.45 0.61/1.64 0.35/0.90 0.27/0.71 0.09/0.25 0.22/0.58 0.25/0.44 In the range of results reported, the smaller number reflects End Use Streetlights Table C-14 BENEFIT-COST ANALYSIS STREETLIGHTS Measures Installed: 1993 npv?'> to = NPV toy, Society Utility Measure ($ 1985) ($_ 1985) From 175W to 100W 159/199 103 High-pressure sodium (capital cost $190-150 and transmission and distribution = 3¢/kWh) From 175W to 100W 9157/4135) 39 High-pressure sodium (capital cost $190-150 and transmission and distribution = 0¢/kWh) @nNPV = Net Present Value. Pohe NPV to society and to the utility reflects a range in distribution (T&D) ($ 1985). costs of $0.00 per kWh to $0.03 per kWh Appendix D Table D-1 ENERGY SAVINGS VERSUS CAPITAL COST FOR NEW SINGLE-FAMILY HOUSING CONSERVATION MEASURES IN JUNEAU Energy Savings Per. Capital Square Foot Economic Cost Per (kWh per year) Life Foot End Use Measure Summer Winter (years) ($_ 1985) Space Heat Double to triple glazing 0.64 1.96 30 0.69 Insulated doors 0.07 0.22 30 0.09 Roof R30 to R38 standard 0.05 0.16 30 Ox2 Floor R19 to R30 0.09 0.28 30 0223 0.6 to 0.3 air changes per hour 0.05 54 30 133 Wall R19 to R25 advanced O35 0.45 30 O57 Roof R38 to R49 0.08 OR23) 30 O32) Install heat pump instead of central forced air 2.04 6.26 20 0.65 Total Energy Capital Savings Cost (kWh/yr) ($_ 1985) Water Heat Rate 12 Improved tank insula- tion and heat traps 301 421 2 105 Rate 13 Improved tank insula- tion and heat traps 306 428 12 105 Rates 12 and 13 Flow restrictors 0 0 @savings for all space heat measures are additive with the exception of heat pump savings. Ti] Table D-2 ENERGY SAVINGS VERSUS CAPITAL COST FOR NEW MULTIFAMILY HOUSING CONSERVATION MEASURES IN JUNEAU Energy Capital Savings Per. Cost Per Square Foot Economic Square (kWh_per year) Life Foot End Use Measure Summer Winter (years) ($1985) Space Heat Double to triple glazing 0.51 1.57 30 0.60 Ceiling R30 to R38 standard 0.05 0.16 30 0.06 Insulated door 0.04 0.12 30 0.05 Floor R19 to R30 0.05 0.15 30 0.13 0.6 to 0.3 air changes per hour 0.50 153 30 1.54 Walls R19 to R25 0.07 0.20 30 0.03 Ceiling R38 to R49 advanced 0.03 0.08 30 0.18 Total Capital Energy Savings Cost (kWh/yr) ($/yr) Water Heat Rate 12 Improved insulation and heat traps 149 208 12 86 Rate 13 Improved insulation and heat traps Sa 241 2: 86 Rates 12 and 13 Flow restrictors 0 0 ?savings for all space heat measures are additive with the exception of heat pump savings. End Use Table D-3 ENERGY SAVINGS VERSUS CAPITAL COST FOR NEW MULTIFAMILY HOUSING CONSERVATION MEASURES IN JUNEAU Measure Energy Savings Per. Square Foot (kWh per year) Summer Winter Space Heat Ceiling Ro to R19 Water Heat Rate 12 Rate 13 Rates 12 and 13 Walls RO to R11 Floor RO to R19 Ceiling R19 to R30 Single-tripe glass Ceiling R30 to R38 Floor R19 to R30 Wood to metal doors Heat pump Blanket and heat traps Blanket and heat traps Flow restrictors 2.82 1.20 0.66 0.23 0.81 0.05 Oe: 0.11 2.04 8.64 3.69 2.04 0.72 2.48 0.15 O533 0.34 6.26 Energy Savings (kWh/yr) 241 S37, 244 342 oO 0 Economic Life (years) 30 30 30 30 30 30 30 30 20 10 10 Capital Cost Per Square Foot 4s 1985) 0.46 0.54 0.86 0.26 Lee On1 0.25 0.50 on42 Total Capital Cost (S/yr) 32 32 ?savings for all space heat measures are additive with the exception of heat pump savings. Table D-4 ENERGY SAVINGS VERSUS CAPITAL COST FOR NEW MULTIFAMILY HOUSING CONSERVATION MEASURES IN JUNEAU Energy Capital Savings Per. Cost Per Square Foot Economic Square (kWh _per year) Life Foot End Use Measure Summer Winter (years) ($_ 1985) Space Heat Walls RO to R11 1.01 3.09 30 0.48 Ceiling RO to R38 edd, 3.42 30 0.89 Floor RO to R38 0.70 2513) 30 0.89 Glass from one to two panes 0.53 1 sO, 30 1.36 Doors R2 to R15 0.05 0.16 30 0.21 Glass from two to three panes 0.16 0.48 30 1.31 Total Capital Energy Savings Cost (kWh/yr) (S/yr) Water Heat Rate 12 Base with blanket and heat traps 116 162 10 32 Rate 13 Base with blanket and heat traps 117 164 10 32 Rates 12 and 13 Flow restrictors 0 0 8savings for all space heat measures are additive with the exception of heat pump savings. Table D-5 ENERGY SAVINGS VERSUS INCREMENTAL COST FOR EXTRA ENERGY EFFICIENT APPLIANCES Electricity Savings Incremental Per Year Economic Capital Summer Winter Life Cost End Use Measure (kWh) (kWh) (years) ($_ 1985) Frost-Free Moderate efficiency Refrigerator (EF=6.0) 172 241 20 29 High efficiency (EF=7.6) 111 155) 20 2 Manual Moderate efficiency Defrost (EF=8.0) 89 124 20 y/ Refrigerator High efficiency (EF=10.0) 54 76 20 24 Manual Foam insulation Defrost (EF=10.4) 173 242 21 29 Freezer High efficiency compressor (EF=13.1) 80 113} 21 aT Clothes 100% saturation of Dryer moisture sensors 15 22; LS 25 Clothes Reduces hot water Washer usage 65 91 se 34 HW Usage Dishwasher Reduced hot water HW Usage usage 96 135 alat 34 ®per appliance. Pe avings estimates are additive within an appliance type. c A : ; 7 F Incremental capital costs equals increase in capital cost for the in- creased efficiency. COMMERCIAL CONSERVATION MEASURES IN JUNEAU Table D-6 ENERGY SAVINGS VERSUS CAPITAL COST FOR Electricity Savings Capital Per Square Cost Per Foot Economic Square (kWh per year) Life Foot End Use Measure Summer Winter (years) ($_ 1985) OFFICE HVAC Temperature setback 1.63 4.98 15 0.08 Wall insulation 0.54 1.66 30 0.52 Celing insulation 0.38 1.16 30 0.36 Infiltration control 0.17 0.51 15 0.46 Storm windows 0.39 1.18 30 2.09 Lights Efficient lights 1.60 2.24 3 0.12 RETAIL HVAC Temperature setback 0.89 2.72 15 0.08 Wall insulation 0.53 1.62 30 0.60 Ceiling insulation 0.45 136 30 0.36 Infiltration control O19 0.58 15 0.40 Storm windows 0'.34) 0.95 30 1.63 Lights Efficient lights 1.66 233 3 0.12 OTHER HVAC Temperature setback dues 3.76 15 0.08 Wall insulation 0.55 1.70 30 0.56 Ceiling insulation 0.43 1.33 30 0.36 Infiltration control 0.19 0.57 15 0.43 Storm windows 0.35 1.09 30 1.86 Lights Efficient lights 1.63 2.29 3 OF 22 , ‘i : b =P b b Streetlights Efficent streetlights 70 21 20 150-190 @savings for all space heat measures are additive with the exception of heat pump savings. Pber bulb. Appendix E Alaska’s slump could last for several years, economists say The Associated Press ANCHORAGE — It may take several years for the Alaska econo- my to pull out of its recession, a group of state and private econo- mists says. “You ain’t seen nothin’ yet,” Bob Richards, former president of Alaska Pacific Bank and unsuc- cessful Republican candidate for governor, told about 150 people at the Anchorage Public Policy Fo- rum last week. “We're just in the initial stages of the recession,” Richards said. “I think. we've just. finished the, first year of a four-year recession.” Gunnar Kanpp, an economist at the Unversity of Alaska’s Institute of Social and Economic oes agreed the outlook is may don’t see any reason to assume that we've hit the bottom of our hard times,” he said. “We can ex that things will get worse for at least this year and several years to come.” Greg Erickson, an economist for the state, said about 10,000 jobs were lost during the past year. He said the decline will continue this year. “I think the loss of jobs could be even greater,” Erickson said. Tony Smith, the newly ap- pointed commissioner of coramerce and economic development, sound- ~ed the only optimism. He said development of the private sector will cushion the economy from. further downturns. The plunge in world oil prices early last year sent omy into a tailspin. Alaska’s econ- Seattle Post Intelligencer 12 January 1987 Appendix F ALASKA ELECTRIC LIGHT AND POWER CO. 134 N. FRANKLIN STREET JUNEAU, ALASKA 99801 (907) 5866-2222 July 8, 1986 Robert J. Cross Administrator Alaska Power Administration P.O. Box 50 Juneau, Alaska 99801 Dear Mr. Cross: This letter contains the comments of the Alaska Electric Light Company (AELP) concerning the proposed interruptible wholesale rate for Snettisham hydroelectric energy. AELP enthusiastically supports the Alaska Power Administration (APA) proposal to implement a reduced rate for interruptible service. It believes such a rate will promote conservation and wise use of both electricity and fuel oil in Juneau. The concept is important to AELP's load management and conservation programs. More specifically, it provides a solid basis for developing dual- fuel electric service which has both load management and conservation benefits for the community. INTERRUPTIBLE SERVICE FOR CONSERVATION AND LOAD MANAGEMENT AELP has been studying ways to improve service choices for its customers and reduce overall costs. It has developed a long- run load management plan and is developing an energy conservation program. AELP believes that interruptible service presents a major opportunity for meeting both load management and conservation goals. The primary market for interruptible service in Juneau is space heating. Since there is not a natural gas utility, there are basically two heating choices: electricity and fuel oil. AELP believes that dual-fuel service, which has worked well for other utilities with heating loads, is an excellent strategy for providing interruptible service. AELP currently provides dual-fuel service to four large commercial customers. It*markets energy to such customers at 4.U0 cents per kwh. AELP has received approval from the Alaska Public Utilities Commission (APUC) to market duel fuel on an experimental basis to residential and small commercial customers in Juneau. Currently, AELP's experimental dual-fuel interruptible rate for residential and small commercial customers is set at 3.0 cents per kwh. This rate is based on two factors: (1) the value of the service to customers, and (2) the marginal cost of service to AELP. The value of service is somewhat lower than the comparable price for oil. This balances the fact that the investment cost for a dual- fuel system is more expensive than for a single oil-fired system. F-1 However, AELP feels an even lower dual-fuel rate is necessary to market the service. AELP's marginal cost for this service is estimated on the basis of cost of purchased power from APA: 2.5 cents per kwh plus U.25 cent to cover system losses plus another 0.25 cent allowance to cover special metering and costs associated with the service. AELP is still analyzing the cost of providing the experimental dual fuel service and there is indication that its special metering and administration costs may approach U.5U cent per kwh. If the APA rate for firm energy is increased to 2.93 cents per kwh it will be necessary to increase the experimental dual fuel rate to 3.43 cents per kwh. APA INTERRUPTIBLE RATE PROPOSAL In its February 5, 1986 letter to Mr. Robert Cross, APA Administrator, AELP proposed that APA help sponsor the dual-fuel concept by adding an interruptible rate to its wholesale rate schedule. Like AELP's dual-fuel rate, it proposed that APA's interruptible rate be available only when APA's hydroelectric supply is surplus. Importantly, the rate would be lower than APA's standard firm rate, reflecting both the lower quality of service and the need to price the service low enough to market the surplus energy competitively with fuel oil. Given the relatively low price of fuel oil now available in Juneau, it is unlikely that it can market dual-fuel service with an underlying wholesale rate equal to APA's existing or proposed regular wholesale service rate. AELP is excited about the opportunities presented by the duai-fuel concept and looks forward to implementing a marketing strategy. ALTERNATIVE INTERRUPTIBLE RATE PROPOSAL: ADJUSTABLE RATE BASES FOR ADJUSTABLE RATE With regard to pricing APA's interruptible service, APA has proposed a wholesale interruptible rate in the neighborhood of 2.0 cents per kwh. AELP supports this proposal. The APA has requested comments on a variable interruptible wholesale rate related to the price of fuel oil. AELP believes such a dual-fuel rate should be supported by three factors: 1. APA Marginal Cost. Since APA's marginal cost for surplus energy is zero, any revenues that could be obtained for surplus energy is attractive. Therefore, whatever the market value is determined to be by competitive forces in the market place, the APA will benefit through surplus sales. 2. Cost Components of AELP's Dual-Fuel Rate. For dual-fuel service, AELP expects to add another 0.50 to 0.75 cent per kwh to APA's interruptible rate. If acceptable to the APUC, the dual-fuel rate will be set to cover only marginal costs for providing this service: the purchase price per kwh from APA, the cost of system losses, direct customer costs such F-2 as special meter costs, and administration. Of course, the major cost component to this rate will be the purchase price of APA energy. 3. Dual-Fuel Marketability. The ultimate marketability of the dual-fuel program will rest on the price of the service compared to the price of fuel oil. As the price of fuel oil changes one way or the other, the marketability of the dual- fuel service also changes, assuming a fixed rate per kwh for the dual-fuel service. If oil prices increase, AELP should get more consumer interest in dual-fuel service; possibly more than it would like. If oil prices decrease, there would be less interest and the program might fail from lack of consumer interest. By establishing an adjustable rate tied to the price of fuel oil, the market could be developed in a controlled fashion and a stable relationship would develop between the heating cost for consumers heating with fuel oil only and those heating with dual- fuel service. PROPOSED RATE STRUCTURE FOR VARIABLE WHOLESALE INTERUPPTIBLE RATE Oil prices in Juneau are currently about $1.00 per gallon. This roughly translates into 4.U cents per kwh for the typical Juneau boiler heating system. In order to market dual-fuel service, AELP believes it must offer a rate of 2.5 cents per kwh. The 1.5 cent difference between the equivalent current oil price and this rate is needed to provide a payback for the extra investment required by the customer in order to install a dual- fuel heating system. This cost is estimated to range from $2,000 to $3,000 for a new household. It could be less for a customer converting from all electric to dual-fuel. AELP is proposing that when Juneau oil prices are $1.00 per gallon, APA's wholesale price be set at 1.75 cents per kwh. This would allow up to 0.75 cent for system losses and AELP's other costs. Further, AELP proposes that in the future for each percentage point difference between the price per gallon of fuel oil in Juneau and the base price of $1.U0 per gallon , APA's rate be adjusted by the same percentage to a maximum rate of 2.5 cents per kwh. For example, if the price of fuel oil increases by 25 percent to $1.25, the APA rate would also increase by 25 percent to 2.2 cents per kwh. AELP proposes the "cap" or maximum rate for this service be set at 2.5 cents per kwh. This “cap” should be guaranteed for a long time, say 10 years and provide some assurance that it will not be changed because of Federal rate reform or the transfer of Snettisham out from U.S. Government ownership. AELP proposes that the rate be adjusted quarterly on the basis of median net price offered by five oil distributors in Juneau. The survey would be conducted by APA in the last month F=-3 of each quarter with the derived median price set as the basis for the wholesale APA price in the tollowing quarter. Under such a scenario AELP would file a tariff with the APUC that would allow it to adjust its dual fuel rate quarterly according to the change in its wholesale energy costs, CONCLUSION AELP believes that adjustable price is fair to consumers and will take some of the uncertainty and risk out of making long term heating investment decisions. Importantly, it will provide a workable strategy for increased load management and conservation efforts in Juneau. Very truly yours, William A. Corbus Manager