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(10)Total Resource Cost test (TRC) – means a standard that is met for an investment in energy efficiency if, on a net present value basis, the total avoided supply-side costs, including representative values for electricity or natural gas supply, transmission, distribution, and other associated costs, are greater than the total costs of administering and delivering the energy efficiency program, including installation costs, incremental measure costs, net costs for any utility or administrator incentives paid by customers, and utility capitalized costs recovered under Sections 7 and 8. (11) (a) Any calculation of cost-effectiveness shall include as an avoided supply- side cost a reasonable estimate of future carbon emission costs avoided as a result of the energy efficiency investment. Verified Electricity or Natural Gas Savings – means electricity savings or natural gas savings that meet the requirements of Section 5. Most definitions recommended above for inclusion in an EERS are self-explanatory. Moreover, many are often already included in other sections of state statutes or administrative code related to public utility regulation. For those that may not be self-explanatory, the explanations are provided below to clarify the intent behind including such terms. “Combined Heat and Power (CHP) System“ CHP systems are an integral part of state EERS programs, representing a significant source of energy savings as well as ancillary benefits, including avoidance of transmission and distribution losses, prevention of electric grid overload and reductions in greenhouse gas emissions. Treatment of CHP systems within the EERS framework can be complex; CHP systems are designed to be site-specific and can differ in design, fuel use and basic technology depending on their application, rendering it necessary for EERS legislative language to recognize that not all CHP is created equal. Additionally, not all CHP and distributed generation should be included within an EERS. An EERS should encourage those systems that are measurably more efficient than the centralized electricity generation serving an area. This should be determined by considering the average heat rate of electricity production in a given state or region, compared to the average heat rate of the applicable electricity production of the CHP or distributed generation system. In some cases, states have looked to set a minimum efficiency for CHP systems—e.g. 60%—and count the electric output of the system as the creditable amount for the purposes of an EERS. While this approach is easier to administer, it fails to account for the variability in CHP systems and the great differences in efficiency between systems. It also fails to compare the efficiency of the system to the efficiency of the centrally generated electricity. For these reasons, the above definition is encouraged, to ensure that the credited efficiency is truly an improvement in efficiency compared to the centrally generated electricity (Chittum et al. 2009). “Cost-effective” Generally, energy efficiency cost-effectiveness test results compare the net present value of the sum of benefits to the net present value of the sum of the costs from different perspectives. A benefit-cost ratio greater than one means the program has positive net benefits. A benefit-cost ratio of less than one means that the costs exceed the benefits. Traditionally, five tests have been used to evaluate the cost-effectiveness of energy efficiency: the participant cost test (PCT), the utility/program administrator cost test (PACT), the ratepayer impact measure test (RIM), the total resource cost test (TRC), and the societal cost test (SCT) (EPA 2008). Each of these tests is defined below. The key questions asked and the benefits and costs compared for each of the tests is detailed in the Table 1, below. Total Resource Cost test (TRC): A test that includes both the participants' and the utility's costs. The benefits for the TRC are avoided energy supply costs. Avoided credit and collection costs should also be included, as they are system costs. The costs in this test are the program costs (including equipment 6PDF Image | Energy Efficiency Resource Standards
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