AGA Natural Gas Efficiency Programs Report - 2010 Program Year - FINAL - DeC 2011

Natural Gas Efficiency Programs Report
2010 Program Year

Copyright 2011 American Gas Association All Rights Reserved Prepared by: Policy Analysis Group American Gas Association 400 N. Capitol St., NW Washington, DC 20001 www.aga.org Contact: Mariam Arnaout, marnaout@aga.org
December 2011
Copyright & Distribution: Copyright 2011 American Gas Association. All rights reserved. This work may not be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage and retrieval system without permission in writing from the American Gas Association. Notice: In issuing and making this publication available, AGA is not undertaking to render professional or other services for or on behalf of any person or entity. Nor is AGA undertaking to perform any duty owed by any person or entity to someone else. Anyone using this document should rely on his or her own independent judgment or as appropriate seek the advice of a competent professional in determining the exercise of reasonable care in any given circumstance. The statements in this publication are for general information and represent an unaudited compilation of statistical information that could contain coding or processing errors. AGA makes no warrantiesexpress or impliedor representations about the accuracy of the information in the publication or its appropriateness for any given purpose or situation. This publication shall not be construed as including advice, guidance, or recommendations to take or not to take, any actions or decisions in relation to any matter, including without limitation relating to investments or the purchase or sale of any securities, shares or other assets of any kind. Should you take any such action or decisions, you do so at your own risk. Information on the topics covered by this publication may be available from other sources, which the user may wish to consult for additional views or information not covered by this publication.
CONTENTS
INTRODUCTION..............................................................................................................................................1 EXECUTIVE SUMMARY ...................................................................................................................................2 METHODOLOGY AND SURVEY SAMPLE ...........................................................................................................4
I. NATURAL GAS EFFICIENCY PROGRAM CHARACTERISTICS............................................................................6 ProgramCharacteristicsandStructure....................................................................................................................7 Objectives...............................................................................................................................................................12 CustomerSegmentsandParticipants.....................................................................................................................12 LowIncomePrograms............................................................................................................................................13 EnergyEfficiencyActivitiesandProducts...............................................................................................................14 CustomerIncentives ...............................................................................................................................................17 . EfficiencyLoans.......................................................................................................................................................25 NaturalGasEfficiencyProgramExpendituresandFunding...................................................................................31 NaturalGasEfficiencyProgramSavingsImpacts...................................................................................................34
II. NATURAL GAS EFFICIENCY PROGRAM FUNDING AND IMPACTS ..................................................................30 NaturalGasEfficiencyProgramExpendituresandFunding...................................................................................31 NaturalGasEfficiencyProgramSavingsImpacts...................................................................................................34
III. NATURAL GAS EFFICIENCY PROGRAM PLANNING AND EVALUATION .........................................................38
IV. NATURAL GAS EFFICIENCY REGULATORY REQUIREMENTS AND COST RECOVERY TREATMENT .................42 PotentialStudies.....................................................................................................................................................42 NaturalGasEfficiencyProgramRequirementsandPolicyGoals...........................................................................43 RateStructuresandRegulatoryTreatmentAlignedwithUtilityandEnergyEfficiencyGoals...............................43 RecoveryofEnergyEfficiencyCosts........................................................................................................................44 DirectProgramCostRecovery................................................................................................................................45 LostMarginRecovery.............................................................................................................................................46 UtilityPerformanceBasedIncentives.....................................................................................................................49 LowIncomeProgramRequirements ......................................................................................................................51 .
FuelSwitchingAllowances......................................................................................................................................51 GreenHouseGasorCarbonEmissionsTargetsandCredits...................................................................................51
V. THOUGHTS AND COMMENTS ....................................................................................................................52 DELIVERYBARRIERSANDLESSONSLEARNED....................................................................................................................52 MARKETPENETRATION................................................................................................................................................54 MOSTSUCCESSFULATTRIBUTES....................................................................................................................................55 MOSTINNOVATIVEFEATURES.......................................................................................................................................58
APPENDIXASTATEENERGYEFFICIENCYPROGRAMPROVISIONSANDPRACTICES.....................................................................62 APPENDIXBNATURALGASEFFICIENCYPROGRAM2010EXPENDITURESAND2011BUDGETSBYSTATE.....................................63 APPENDIXCNATURALGASEFFICIENCYPROGRAM2010EXPENDITURESAND2011BUDGETSBYREGION...................................64 . APPENDIXDNATURALGASEFFICIENCYPROGRAMSAVINGSIMPACTSBYREGION ...................................................................65 APPENDIXESURVEYPARTICIPANTCOMPANIES..................................................................................................................66
INTRODUCTION
Awareness of the energy economy has steadily grown beyond the purview of business and public policy. Economic and environmental concerns have become increasingly important drivers of consumer decisions about energy. With this has come heightened attention to the potential for energy efficiency to moderate consumer cost increases, reduce greenhouse gas emissions and enhance energy security. For natural gas utilities, investing in natural gas efficiency programs presents an opportunity to achieve these objectives and benefit the communities they serve. Many have long-performing natural gas efficiency programs, while others are working with their regulators to pave the way for new programs that will accelerate progress towards realizing a clean energy future while building sustainable value for utilities and their customers. The AGA Natural Gas Efficiency Programs Report - 2010 Program Year presents data collected from members of the American Gas Association and the Consortium for Energy Efficiency on ratepayer-funded natural gas efficiency and conservation programs.1 The report aims to portray the extent of this rapidly growing market in the United States and Canada and to identify practices and trends in program planning, funding, administration and evaluation. This fifth annual study looks retrospectively at the status of the natural gas efficiency market in 2010, including expenditures and savings impacts, and presents a snapshot of budgets for 2011. Also explored are regulatory approaches to advancing the natural gas efficiency market. The findings illustrate how natural gas utilities have worked with their customers to help them reduce their carbon footprint and increase cost savings and with regulators to bring about progressive policies that support such initiatives. An important contributor to this data gathering project is the Consortium for Energy Efficiency (CEE). The data collection effort has expanded significantly since AGA and CEE began coordinating the collection of efficiency data in 2009. By joining forces, AGA and CEE have reduced the reporting burden for respondents, eliminated duplicative efforts for our organizations, and significantly enlarged the sample poolextending the survey to more utilities in the U.S. and Canada and to third-party administrators of ratepayer-funded efficiency programs. AGA would like to thank the members of AGA and CEE in the U.S. and Canada for participating in this important data-collection effort. We appreciate tremendously the time and effort given by all survey respondents throughout the data collection process, including extensive clarification and data validation follow up. (See Appendix E for a listing of participating companies).
The Consortium for Energy Efficiency (www.cee.org) is a nonprofit public benefits corporation that develops initiatives for its North American members to promote the manufacture and purchase of energy-efficient products and services. CEE members include utilities, statewide and regional market transformation administrators, environmental groups, research organizations and state energy offices in the U.S. and Canada. Natural Gas Efficiency Programs Report 2010 Program Year, Page 1 of 67
EXECUTIVE SUMMARY
In 2011 the American Gas Association (AGA) and the Consortium for Energy Efficiency (CEE) surveyed their U.S. and Canadian members and other efficiency program administrators on the status of their 2010 ratepayer-funded natural gas efficiency programs, including low-income weatherization. Based on survey findings for the 2010 program year: Natural gas utilities continue to help their customers to reduce energy usage and lower their annual energy bills by investing in successful and innovative efficiency programswhich include cash rebates and financial incentives, low-income specific programs, strategic partnerships, joint programs with other electric and gas utilities, efficiency loans, education campaigns, targeted marketing, energy audits, whole house projects, and customized retrofits of large facilities. Natural gas utilities fund 133 natural gas efficiency programs127 in 40 states and six in Canada. U.S. utilities plan to launch two new programs in 2011. Residential natural gas efficiency program participants in the U.S. saved on average ten percent of usage or about 76 Therm per year, averaging $62 in cost saving on their annual energy bill. In the United States, utilities invested nearly $838 million in efficiency programs in 2010. They also budgeted nearly $1.2 billion for the 2011 program year (which represents a growth of 42 percent compared to 2010 spending levels).2 In North America (U.S. and Canada), natural gas efficiency program expenditures approached $914 million in 2010. Program budgets are set at nearly $1.3 billion for the 2011 program year (projecting a 42 percent increase in spending). U.S. spending on evaluation, measurement and verification activities reached $9.4 million in 2010, and it is estimated to approach $27 million in 2011 (a 182 percent increase). On a revenue basis, median spending for utilities on efficiency programs was 1.2 percent of net natural gas distribution revenues (net of gas costs) in 2010ranging from less than 0.1 percent to nearly 14 percent of net revenues. In 2010 U.S. customers saved nearly 81 trillion Btu through natural gas efficiency programs (a 53 percent increase from the 53 trillion Btu achieved in 2009), thus offsetting 4.2 million metric tons of carbon dioxide (CO2) emissions. In North America (U.S. and Canada), natural gas savings impacts from efficiency programs reached nearly 135 trillion Btu in 2010the equivalence of 7 million metric tons of avoided CO2 emissions (a 45 percent increase from the 90 trillion Btu achieved in 2009). Eighty-one percent of rate-payer funded programs provide natural gas efficiency programs to low income customers, and 73 percent of all programs provide low- or no-cost weatherization assistance.
The survey samples for 2010 expenditures and 2011 budget are similar but not identical. Natural Gas Efficiency Programs Report 2010 Program Year, Page 2 of 67
Twenty-eight states require utilities to fund natural gas efficiency programs, and 29 states mandate that they implement weatherization and/or energy efficiency programs specifically for low-income customers. Thirty-nine states permit utilities to recover natural gas efficiency program costs, 30 allow them to recoup lost margins related to program implementation, and 15 approve financial incentives to reward efficiency program implementation or performance. Recovery of natural gas efficiency direct program costs are allowed via the following mechanisms: special tariff or rider in 27 states base rates in 20 states system benefits surcharge in eleven states other mechanisms in seven states
Sixteen percent of regulator-approved natural gas efficiency programs permit fuel switching, and about eight percent measure efficiency from the energy source to the usage site by applying a full fuel cycle analysis.
Natural Gas Efficiency Programs Report 2010 Program Year, Page 3 of 67
METHODOLOGY AND SURVEY SAMPLE

In 2011 the American Gas Association (AGA) and the Consortium for Energy Efficiency (CEE) surveyed their U.S. and Canadian members and other efficiency program administrators on the status of their 2010 ratepayer funded natural gas efficiency programs, including low-income weatherization.3 This includes non-utility or third-party administrators of ratepayer funded natural gas efficiency programs.4 In this report, the term natural gas efficiency program refers to a set of activities designed to promote a cost-effective and prudent approach to energy usage, including low-income single and multifamily residence weatherization, indirect impact activities (e.g., conservation education, contractor certification), and direct impact activities in new and existing buildings and homes (e.g., equipment replacement, Energy Star Homes; a more detailed description of such activities begins on page 16). The sample frame consists of all member organizations of AGA and CEE and nonmember organizations identified as large program administrators. The response rate from natural gas efficiency program administrators was 95 percent. Therefore, natural gas efficiency statistics may be slightly understated in this report. Responses were received for 127 programs, implemented in the U.S. in 2010 and six in Canada. The survey asked respondents to describe their natural gas efficiency programs during the 2010 calendar year (or coinciding program year for which data were available), which included expenditures and energy savings data for these programs. Also 2011 data were collected on efficiency program budgets and estimated participant counts. Two variations of the survey were distributed: a short form was distributed to CEE utility members and administrators of statewide energy programs, and a long form was distributed to all AGA members. The short form focuses mainly on natural gas efficiency program funding and savings impacts. The long questionnaire includes questions on program planning, structure, funding and savings, evaluation, and regulatory treatment. The introductory part of this report and part II encompass all collected data from short and long forms, and the remainder discusses responses from the subset of companies that completed the long form (110 companies in the U.S. and three in Canada). The utilities represented in this report have natural gas service territories in 40 states and Canada. They account for 78 percent of the natural gas delivered by gas distribution companies in the United States and have an aggregate annual U.S. throughput of 10.1 trillion cubic feet (Tcf).5 These companies serve nearly 51 million residential customers, corresponding to nearly 78 percent of the U.S. residential natural gas market. Not all reporting companies answered every question on the survey. Therefore the response sample varies question to question. Because the sample pool is not normalized and varies year to year, this report does not directly compare 2010 with prior year data, except for illustrative purposes. Tables and charts generally represent a simple tally of the responses to the survey questionnaire. Report footnotes and section introductions provide additional information regarding methodology.
Because a number of low-income weatherization programs are run by state agencies that did not participate in this survey, report data tend to understate low-income programs expenditures and budgets.
Appendix E lists the companies represented in this report, including those that did not respond directly but whose data were provided by third-party administrators. While only national aggregates are presented in the report, Appendix B, C and D present expenditures and budgets data aggregated by state and region and energy savings data aggregated at the region level. Based on Energy Information Administration consumption data: Natural Gas Annual 2009 (Released December 28, 2010) Natural Gas Efficiency Programs Report 2010 Program Year, Page 4 of 67
I. NATURAL GAS EFFICIENCY PROGRAM CHARACTERISTICS

According to 2010 program year data, there are at least 133 active natural gas efficiency programs in North America127 in the U.S. and six in Canadathat are funded by local natural gas utilities. Two other programs are planned for launch in the U.S. in 2011 (see Figure 1).
Figure 1
Ratepayer-Funded Natural Gas Efficiency Programs in 2010

(133 Active in 40 States & Canada and 2 Planned)
The 127 U.S. programs include 117 that are administered by utilities (in part or whole) and ten that are implemented solely by a statewide energy efficiency program administrator, such as the Energy Trust of Oregon, New Jersey Clean Energy Program, New York State Energy Research and Development Authority, and Wisconsin Focus on Energy. Seventeen of the 117 utilities fund third-party administered programs in conjunction with their own utility-implemented programs; however, to avoid double-counting, these are counted once in this report.
Program Characteristics and Structure

From this point forward (except for part II, which focuses on funding and savings data for all survey respondents), this report describes a subset of ratepayer-funded natural gas efficiency programs for which a full set of qualitative data was obtained. This subset comprises 113 programs (110 in the U.S. and three in Canada) funded by the ratepayers of 73 natural gas distributors, 38 combination gas-electric utilities and two municipally-owned utilities (see Table 1).
Table 1
NATURALGASEFFICIENCYPROGRAMIMPLEMENTATIONBYUTILITYTYPE
113PROGRAMS
COMPANYTYPE InvestorOwnedNaturalGasDistributor InvestorOwnedGas&ElectricUtility MunicipallyOwnedUtility
PROGRAMS 73 38 2
PERCENTAGE 65% 34% 2%
The majority of natural gas efficiency programs (80 of 113) are implemented as natural gas-only programs, while 33 are combined with electric efficiency programs (see Figure 2).
Figure 2
Natural Gas Efficiency Programs Structure

Total = 113 programs
Gas Only (80)
29%
Gas & Electric (33)
71%
Gas Ef f iciency Program Characteristics
Many natural gas efficiency programs have been in place for many years, and they continue to grow. Generally programs range from newly launched programs to mature programs that span 20 or more years (see Table 2). Forty percent of programs have been in place ten years or longer, and half of those have operated for at least 20 years. However, the other 60 percent were implemented within the last 10 years, and the median program age is four years. Nearly 22 percent of programs were launched in 2009 and 2010.
Table 2
NATURALGASEFFICIENCYPROGRAMSSINCEINCEPTION
111PROGRAMS
YEARSINSERVICE Lessthan1(2010start) 1<10 10<20 20ormore
NUMBEROFPROGRAMS 8 59 22 22
Forty-three percent of natural gas efficiency programs (48 of 111) expanded since the 2009 program year. Utilities accomplished this by revising conservation improvement plans, setting higher energy savings targets, accessing new markets and customer segments, increasing funding and participation levels, and enhancing outreach (via marketing and conservation education). Some initiated new rebate programs, while others boosted their existing incentives by increasing rebate levels and adding other qualifying equipment. Many added new programs such as quality installation training, building operator certification, Energy Star New Home, school outreach, small business, and behavioral change programs (e.g., Energy Feedback Pilot, Neighborhood Energy Savings Outreach). Other examples of programs and products that were added by survey respondents during 2010 are appliance retention and replacement programs, home energy audits, insulation and air sealing, gas fireplace electronic ignitions, direct install, commercial boiler tuneup, Deep Energy Retrofit, prescriptive and custom programs, C & I thermostats, business energy calculator, standard commercial kitchens, agricultural, and lodging. A diverse group of parties administers natural gas efficiency programs: 66 percent (73 of 111) are administered by the utility alone, six percent by a nonprofit organization, three percent by a government agency, and one percent by another type of entity (e.g., a private contractor).
Another 21 percent are managed by a utility working with other groups, and four percent are run by two or more non-utility entities (see Table 3).
Table 3
NATURALGASEFFICIENCYPROGRAMSADMINISTRATION
111PROGRAMS
UtilityAdministered NonprofitOrganization GovernmentAgency OtherEntity UtilityWorkingwithOtherEntities TwoorMoreNonUtilityEntities
PROGRAMS 73 7 3 1 23 4
PERCENTAGE 66% 6% 3% 1% 21% 4%
Among the other parties cited as working with the utility are statewide program administrators, private program management contractors, conservation consultants, electric utilities, university outreach groups, government agencies, and community action agencies that deliver low-income programs. When the utility is the administrator, non-evaluation program functions are carried out by in-house staff in 57 percent of programs (56 of 97 programs) and by a third party in nearly 12 percent (or 12 programs). In in-house staff collaborate with a third party in the other 30 percent (or 29 programs). (The Program Planning and Evaluation section discusses assignment of evaluation functions). In many utility-administered programs, full-time staff is assigned to energy efficiency roles, while in other programs employees charge only a portion of their time towards energy efficiency functions. For example, instead of efficiency-specialized full-time employees, marketing and rates staff might undertake efficiency-related tasks as needed. A mix of the two setups is also common. A calculation of full-time equivalent (or FTE) staff represents the combined hours used for energy efficiency projects, divided by the number of hours in a standard work day for a given program year. Based on 88 responses, the number of internal FTE staff involved in energy efficiency projects ranges from 0.25 to 132 employees; however, the median number of FTE is two. Table 4 groups programs into FTE size groups and shows the number and percentage of programs that falls within each FTE category.
As shown in Table 4, 71 percent of natural gas efficiency programs have fewer than five full-time staff equivalents, and only five percent of programs fall within the 50 or more FTE category.
Table 4
UTILITYADMINISTEREDNATURALGASEFFICIENCYPROGRAMSTAFF
88PROGRAMS
FULLTIMEEQUIVALENTSTAFF OneorLess 1><5 5<10 10<25 25<50 50ormore
PROGRAMS 23 40 10 7 4 4
PERCENTAGE 26% 45% 11% 8% 5% 5%
Fifty-three of 111 respondents (48 percent) either coordinate or jointly administer programs with other utilities and organizations. More than half of the 53 respondents work with electric, gas or combination utilities to achieve consistent program offerings and delivery and reduce implementation costs, thereby increasing benefits to customers. These utility collaborations may take the form of common program implementation (either throughout the state or among a subset of utilities), or they may on the other hand involve a distribution of functions between the parties (with each entity responsible for different programs or administrative functions). Utilities that are involved in common implementation often share the planning, marketing, web pages, hired consultants, evaluation, and reporting components of their programs. In other jurisdictions, gas and electric utilities coordinate specific efficiency measures or fund specific programs that benefit their mutual customers. Still others have agreements to address both fuels during an energy audit. Other examples of utility partnering are cost sharing, referral exchanges between gas and electric utilities, uniform rebates, data sharing on efficiency measures, and sponsorships of energy efficiency outreach events. In one example, the gas utility shares rebate incentives for high efficiency furnaces with an electric commutated motor (ECM) and claims the resulting lighting savings in electric municipal territories. In some cases utility partnerships are required by the state; however, in others they are voluntary. Utilities also work with nonprofits, community action agencies, conservation consultants, third-party vendors, and city, county and state agencies. They either coordinate low income weatherization activities with community action agencies or reimburse these agencies for incentives and/or administrative costs. Also some of the utilities that fund statewide energy efficiency program leverage these programs by offering free home energy audits and enhanced rebates to participants in the statewide program. Others present their customers with the option to select between statewide program rebates or utility financing.
Trade allies form another vital partner to the utility in raising customer awareness and delivering efficiency products and services. Many program managers recognize the necessity to engage, incentivize and train trade allies in transforming the market. Seventy-nine percent of respondents (87 of 110) indicated that they partner with one or more parties in the market supply chain during the 2010 program year. Of the 87 programs, 99 percent partner with contractors, 67 percent with retailers, 56 percent with equipment distributors, and 33 percent with manufacturers (see Table 5).
Table 5
NATURALGASEFFICIENCYPARTNERSHIPSWITHTRADEALLIES
87PROGRAMS
TRADEPARTNER Manufacturers EquipmentDistributors Retailers Contractors Other
NUMBEROFPROGRAMS 29 49 58 86 9
PERCENTAGE 33% 56% 67% 99% 10%
While 22 percent of respondents have partnered only with contractors, the rest have relationships with more than one supply chain partner. In fact, 24 percent are involved with all four trade allies. Also ten percent engage other market players, such as builders and developers. Relationships with trade partners vary from casual arrangements to formal networks of contractors, authorized dealers, and trade ally focus groups. Utilities provide members of their trade ally networks with efficiency education, program-specific information (e.g., efficiency rebates, application process), and marketing materials (e.g., displays, brochures, mailers, in-store advertising, and tear sheets). They also offer cooperative advertising and co-branded materials, technical training, training incentives or subsidies, website listings, equipment sales incentives or bonuses, ongoing technical and sales support, newsletters, and/or contractor certification. Some utility efficiency programs have dedicated trade relations managers who engage in direct outreach to trade representatives and maintain relationships via continued sales and technical support. Other trade partner outreach includes seminars, presentations at trade group meetings, and marketing at trade shows. A few programs have introduced novel arrangements with the trade community to encourage customers, which include instant rebates through the contractor or at the point of purchase and free customer savings cards that give access to discounts on efficient products and services at participating local retailers. By working with efficiency program administrators, the retailers and dealers benefit from increased sales through enhanced marketing and lowered up-front cost for the customer. Generally the relationship between efficiency programs and trade partners presents mutual promotional opportunities. Trade allies inform customers about efficiency program incentives, and in turn many efficiency programs provide customer referrals to these market partners. Commercial technologies are also marketed via trade allies. Basically, program administrators are able to target a wider market segment via trade allies, and are able to have an influence on the types of energy efficiency products that are made available to energy consumers.
Objectives
When asked to select all goals that drive their natural gas efficiency programs, respondents answered as follows: 107 of 111 target direct impact on energy savings, 87 engage in behavioral change (via education, training or direct outreach to customers and others), 65 seek market transformation (through manufacturers, distributors, retailers and consumers of energy-related products and service), and 41 aim for avoided emissions. Thirty percent (33 of 111) set all four goals for their programs (see Table 6).
Table 6
PURPOSEORGOALOFNATURALGASEFFICIENCYPROGRAM
111programswithoneormoregoals
GOAL DirectImpactonEnergySavings BehaviorChange MarketTransformation DirectImpactonAvoidedEmissions Other
NUMBEROFPROGRAMS
107 87 65 41 13
PERCENTAGE
96% 78% 59% 37% 12%
Thirteen respondents cited different or supplemental goals as follows: cost-effectiveness, job creation and economic development, assistance to low-income customers via weatherization services, reduction of low-income customers energy bills and payment arrears, minimizing utility uncollectible expenses, mitigating growth in electricity consumption and dependence on other fuels, and reducing peak and off-peak electric generation needs thus mitigating transmission infrastructure investments.
Customer Segments and Participants

Respondents were asked to identify all customer segments in their efficiency programs. Eightynine percent (96 of 108) have residential efficiency programs, 74 percent have low-income, 69 percent have commercial/industrial (C & I), and nine percent have separate industrial programs. While 53 percent of programs include all customer segments, ten of 108 have only residential, eleven only low-income, and one has only a C & I program (see Table 7). Participant counts were obtained for 101 active natural gas efficiency programs in 2010, and estimated participant counts were gathered for 95 programs in 2011. Not all programs track or report participation rates or the number of enrollments. In cases where respondents do not actively monitor participants, they provided estimates. Others track the number of paid rebates or grants instead of participating customers. Still others differ on whether to count online audits, behavioral conservation program reports, home savings evaluations, or students participating in school-based education programs. The numbers in Table 7 reflect these discrepancies and thus participant figures should be considered as very rough estimates.
During 2010, enrollments in natural gas efficiency programs reached more than 2.4 million residential customers, 431 thousand low-income participants, and 148 thousand C & I customers. Nearly two thousand customers were enrolled in separate industrial programs. In a few cases, programs had low to no participation in 2010 due to late program implementation. Table 7 shows participant counts for 2010 and estimates for 2011.
Table 7
PROGRAMPARTICIPANTSBYCUSTOMERSEGMENT
2010PROGRAMYEAR 2011(ESTIMATED) RESIDENTIAL
96PROGRAMS
LOWINCOME
80PROGRAMS
C&I 75PROGRAMS 148,127 176,663
SEPARATEINDUSTRIAL
10PROGRAMS
2,413,153 2,363,547
430,913 309,517
1,931 3,948
Participants per program vary widely. During the 2010 program year, the median participant count for residential programs was 3,862, ranging from as few as 53 to as many as 455,672 customers. In low-income programs, with a range of three to 133,329 participant customers, the median count was 249. C & I programs had from one to 84,870 accounts, and the median participant count was 144, while separate industrial programs enrolled from nine to 241 participants, with a median of 110 participants.
Low Income Programs

As mentioned earlier, 74 percent of natural gas efficiency programs provide conservation or energy efficiency activities to low-income customersother than education, counseling and online tools. When asked whether they had income-specific efficiency programs, 71 percent of respondents (79 of 111) indicated that they had a set of efficiency programs exclusively available to their low and limited-income customers. These income-qualified programs are administered by the utility in 32 percent of programs (or 25 of 79), a community action agency in 23 percent (18 programs), the state in one program, and by a different entity in six percent (or five programs). A group of varied entities runs the remaining 38 percent (or 30 programs). Some of these coordinated efforts involve joint delivery of gas and electric low-income efficiency programs. Others involve the utility working with community action agencies (CAA) to leverage both the CAAs grassroots networks and federal weatherization funding, thereby providing a more comprehensive set of measures and accessing a larger number customers in this hard-to-reach distressed market segment. Additionally, several utilities that do not administer their own lowincome efficiency activities support statewide energy efficiency low-income programs. Income-specific efficiency programs generally present income-qualified renters and home owners with solutions that help them manage their energy usage and save on their monthly energy bills. Utilities gear their low income programs toward either or both single and multi-family housing, as retrofits or in new construction (examples of such programs include municipal housing retrofit programs and new affordable housing programs).
Some programs offer low-cost measures to customers, based on income qualifications, either by following federal poverty level guidelines or by using a lower poverty threshold to expand the pool of eligible customers. In some cases, additional incentives are offered to near low-income customers (just above the federal standard). Many programs cover 100 percent of the incremental cost of converting to higher efficiency appliances, while others provide a fixed dollar amount per specific measure, covering a significant portion of the equipment replacement cost. In a few cases, a portion of health and human safety measures and/or repairs are also covered under the low-income program. Generally, traditional residential direct rebates are often inadequate to motivate customers at certain poverty levels to implement home efficiency improvements; therefore, many low income programs are offered at no cost to the household. Besides weatherization services (e.g., air and duct sealing, roof and floor insulation, appliance and pipe wrap), these no-cost programs may include the replacement and installation of high efficiency natural gas furnaces, boilers, dishwashers, clothes washers, water heaters (storage or tankless), and/or cooking ranges. Also included in many no-cost programs are window replacements and programmable thermostats.
Energy Efficiency Activities and Products

Survey respondents were asked to identify all efficiency components they offered in each of four customer segments. According to 111 responses, one or more efficiency activity is offered in 100 programs to the residential single family segment, in 90 programs to the residential low income segment, in 82 program to the C & I segment, and in 79 programs to the residential multi-family segment. Based on these responses, when taking into account indirect impact activities, 81 percent of programs provide conservation and/or energy efficiency activities to low income customers (see Table 8).
Table 8
UTILITYIMPLEMENTEDNATURALGASEFFICIENCYPROGRAMACTIVITIESBYCUSTOMERSEGMENT
111reportingprogramswithoneormoreefficiencyactivity
RESIDENTIAL SINGLEFAMILY
100PROGRAMS
ENERGYEFFICIENCYACTIVITIES
Weatherization Ind i re ct I m p ac t P rog r ams Certification Education OnlineTools TechnicalAssessment Training D i r e c tI m p ac t Programs Exis tin gBu ild in gs D i r e c tI m p ac t Programs: N e w C o n s t r u c t i o n / E x p a n s i o n s O th e r
RESIDENTIAL MULTIFAMILY
79PROGRAMS
RESIDENTIAL LOWINCOME
90PROGRAMS
C&I
82 PROGRAMS
60 18 92 71 60 43 83 57 8
42 14 68 51 43 33 62 37 4
81 18 71 54 53 34 76 33 5
8 64 53 49 42 70 45 2
Table 8 breaks down responses by customer segment and energy efficiency activity. Residential single family efficiency programs enjoy the most comprehensive set of efficiency activities, followed by residential low income, commercial/industrial, and residential multi-family programs. A look at specific efficiency activities shows that education outreach is most adopted across segments, particularly in the residential single family and low income segments (83 percent and 64 percent of these programs, respectively). Examples of such activities include school education programs, brochures, and bill inserts. Also widely prevalent are direct impact activities in existing homes or buildingsin 75 percent of residential single family, 68 percent of low income, 63 percent of C & I, and 56 percent of residential multi-family programs. These direct impact retrofit type activities include equipment replacement and upgrades (e.g., appliances, doors, windows, and thermostats), building retrofits, commercial food service, process equipment, energy management systems and custom process improvements. Weatherization is another well-established activity in many programs, particularly in the low income segment (in 73 percent of these programs) and in residential single family segment (54 percent). These weatherization activities incorporate building shell insulation and air sealing (ducts and wall cracks). Also commonly employed are web tools (e.g., online energy savings calculators) and onsite energy audits, which tend to be low cost relative to other program components. Also standard in many programs are direct impact activities for new homes and buildingsused in 51 percent of residential single family programs and 41 percent of C & I programs. Direct impact activities encompass energy efficient homes, efficiency design assistance and industrial efficiency. Efficiency training and certification (of contractors, installers and building operators) tend to lag behind other program components. In residential applications, technical training is provided in 39 percent of single family, 31 percent of low income, and 30 percent of multi-family programs. Thirtyeight percent of C & I programs provide energy efficiency training. Professional certification is offered in 16 percent of residential single family and low income programs, 14 percent of multifamily programs, and 7 percent of C & I programs. A relatively small number of respondents selected other energy efficiency activities. In this category, they included elementary school education with direct install kits, in-home energy consultation with direct install, and behavioral feedback. Energy Efficiency Products: Respondents were asked to identify all products (equipment and comprehensive projects) included in their natural gas efficiency programs and to indicate whether their programs recognized different performance levels within a product category and as such varied incentive amount based on the equipments or overall projects efficiency level. On the following page, Table 9 depicts survey responses by program segment and product category. Based on answers of 113 respondents, the most prevalent products in residential natural gas efficiency programs are furnaces (92 percent of programs overall), storage water heaters (76 percent), boilers (73 percent) and tankless water heaters (59 percent). Similarly, in the commercial segment, boilers are most offered (62 percent), followed by furnaces (61 percent), storage water heaters (57 percent), and tankless water heaters (50 percent). Custom programs are most common in separate industrial segment (in 36 percent of efficiency programs overall). Other products listed by 28 respondents, include energy assessments, attic and wall insulation, air and duct sealing, renewable energy, programmable thermostats, ECM (electronically commutated motor) furnace fans, boiler rest controls, and drain water heat recovery units tied to gas hot water heating systems.
Table 9
PRODUCTSINCLUDEDINNATURALGASEFFICIENCYPROGRAMS2011
113PROGRAMS PROGRAMS,PRODUCTSANDSERVICES
PROGRAMSOFFERINGTHIS PRODUCT PROGRAMS PERCENTAGE PROGRAMSTHATMATCHLARGERINCENTIVES WITHHIGHEREFFICIENCYPERFORMANCE RESPONSES PROGRAMS PERCENTAGE
RESIDENTIALSEGMENT
Furnaces Boilers
104 83 36 46 23 10 20 86 67 9 21 47 55 28
92% 73% 32% 41% 20% 9% 18% 76% 59% 8% 19% 42% 49% 25%
100 79 33 43 22 9 18 82 64 9 19 44 52 28
46 33 5 9 10 2 4 31 13 4 1 29 29 1
46% 42% 15% 21% 45% 22% 22% 38% 20% 44% 5% 66% 56% 4%
HVAC
QualityInstallation Tuneup/ControlsUpgrade DirectHeatingEquipment
APPLIANCES
Dishwashers ClothesWashers Storage
WATERHEATERS
Tankless SolarThermal
WINDOWS NEWCONSTRUCTION HOUSERETROFIT OTHER
AnyProduct WholeHome WholeHome
COMMERCIALSEGMENT
ENERGYMANAGEMENT AnyProduct Furnaces Boilers
36 69 70 21 31 45 52 18 25 64 56 15 47 38 39
35% 61% 62% 19% 27% 40% 46% 16% 22% 57% 50% 13% 42% 34% 35%
35 66 67 20 31 45 50 18 25 61 54 15 45 36 37
20 44 47 5 15 23 18 7 8 30 20 9 16 27 26
57% 67% 70% 25% 48% 51% 36% 39% 32% 49% 37% 60% 36% 75% 70%
HVAC
QualityInstallation GasFiredPackagedUnitaryEquipment UnitHeaters Tuneup/ControlsUpgrade
APPLIANCES
Dishwashers ClothesWashers Storage
WATERHEATERS
Tankless SolarThermal
KITCHENS NEWCONSTRUCTION RETROFIT
AnyProduct WholeBuilding WholeBuilding
SEPARATEINDUSTRIALSEGMENT
PRESCRIPTIVE(ANYPRODUCT) CONTINUOUSENERGYIMPROVEMENTORSTRATEGICENERGYMGMT. PLANTASSESSMENTS CUSTOM
33 23 30 39 25
29% 20% 27% 36% 22%
33 23 28 38 24
19 12 12 23 4
58% 52% 43% 61% 17%
OTHER
Additional residential products include chimney dampers, low-flow showerhead and faucet aerator kits, clothes dryers, space conditioning, pipe wrap, combination space heat/water heating units with condensing tankless water heaters, and hearth products (e.g., high efficiency hearths, pilotless gas fireplaces, electronic ignition for qualifying gas fireplaces). Another specific residential product is a new 90% AFUE furnaces in conjunction with duct sealing and BPI certified blower door and duct blaster testing. Additional C & I products include chillers, steam traps, primary air dampers, vent dampers, low-flow pre-rinse sprayers, radiant hydronic heating systems paired with water heaters, retro commissioning of gas building controls, engineering studies, modulating burners, combined heat and power, commercial retrofit programs (both custom and prescriptive measures), and building energy benchmarking with shared costs for certification. In terms of financial incentives, many programs follow a tiered approach to appliance or whole project efficiency, recognizing the varying efficiency performance levels within each product category. These programs therefore match financial incentives to the equipments efficiency rating or the projects overall efficiency performance, rather than having the same incentive for all equipment models or efficiency projects that reach a certain efficiency threshold. In the residential category, tiered efficiency incentives are offered in 66 percent of new whole home, 56 percent of whole home retrofit, and 46 percent of furnace programs. In the commercial segment, stepped up incentives are offered in 75 percent of new whole building, 70 percent of whole building retrofit, 70 percent of boiler, and 67 percent of furnace programs. Table 9 shows the number and percentage of programs in each segment and product category that enhance incentives with increased product efficiency. The next section (Customer Incentives), discusses further financial incentives and appliance rebates offered to customers to encourage efficiency improvements.
Customer Incentives
Incentives Funding: Natural gas efficiency programs offer customers financial incentives to encourage energy conservation and improved efficiency. These include appliance rebates, equipment or project financing, and in many cases free measures to low income customers. Respondents reported 2010 expenditures for customer incentives and 2011 budgets. In North America, programs spent about $383 million on customer incentives of which $213 million were allocated for residential incentives, $51 million for low income, $93 million for commercial, $19 million for industrial, and $8 million for other incentives.6 In the United States, $203.8 million in incentive funds were used for residential programs, $48.8 million for low income, $84 million for commercial, $11.5 million for industrial, and $7.9 million for other incentive programstotaling to $356 overall.
In this report, North America refers to Canada and the United States of America
Figure 3 shows the distribution of customer incentives funds in North America by market segment for the 2010 program year. As seen, residential programs were allotted more than 50 percent of incentive funds.
Figure 3
2010 Natural Gas Efficiency Incentives Program Expenditures by Sector

86 Residential, 53 Low Income, 66 Commercial and 8 Separate Industrial Programs = $383.4 Million in North America
Other $7.9 million Industrial $18.6 million
2% 5% 55% 24%
Residential $212.6 million
Commercial $93.1 million
13%
Low Income $51.2 million
Gas Efficiency Program Chracteristics
Efficiency incentive budgets for 2011 in North America include $282 million for residential programs, $66.9 million for low income, $140.3 million for commercial, $38.4 million for industrial, and $12.6 million for other incentives (a total of $540.3 million). United States 2011 incentive budgets total $508.2 million, of which the $272.9 million are slated for residential programs, $61.4 million for low income, $131.6 million for commercial, $29.8 million for industrial, and $12.6 million for other incentive programs. The "other category consists primarily of cross-segment financial incentives; however, a few respondents included funds for product development, market transformation, energy audits and free programmable thermostats. Some respondents were unable to separate industrial incentive dollars from commercial funds, while others combined commercial incentive dollars into the residential category. Therefore, about eight percent of 2010 commercial expenditures and about nine percent of 2011 commercial budgets, respectively, include industrial dollars. Less than one percent of residential incentive dollars (2010 and 2011) include commercial incentives. Cash Rebates and Other Financial Incentives: Program administrators use these incentive funds to provide customers with rebates on high-efficiency natural gas appliances, subsidize larger home or building efficiency projects, or finance energy-efficient purchases. Eight-three percent of natural gas efficiency programs (92 of 111) offer customers in one or more segments cash rebates or other financial rewards for energy efficiency improvements. Residential customers are offered
incentives in 81 percent of programs (90 of 111), low income customers in 28 percent, commercial in 63 percent, and industrial customers in 33 percent of programs. Seventeen percent (or 19 programs) have financial incentives for all customer segments. As seen in Table 10, the incentive dollar amount varies widely depending on the type and number of measures and resulting energy savings.
Table 10
DOLLARRANGESFORGASEFFICIENCYREBATES&INCENTIVEPROGRAMS
EFFICIENCY MEASURES Furnaces Boilers Dishwashers Clothes Washers Storage Water Heaters Tankless Water Heaters Whole Home or Building Retrofits New Whole Home or Buildings Windows Programmable Thermostats Food Service Equipment Energy Mgmt. Systems Custom Incentive Programs Other
RESIDENTIAL (90Programs) LOWINCOME (31Programs) COMMERCIAL (70Programs) SEPARATEINDUSTRIAL (37Programs)
PROGRAMS
DOLLAR RANGE
PROGRAMS
DOLLAR RANGE
PROGRAMS
DOLLAR RANGE
PROGRAMS
DOLLAR RANGE
77 60 8 21 66 54 43 13 16 49
$35 $35 $20 $20 $25 $120 $40 $225
$1,000 $3,000 $100 $100 $550 $800 $10,000 $8,000 $260
27 22 5 8 24 16 21 15 7 18
$35 $35 $20 $20 $50 $500 $250 $100
$4,500 $5,000 $100 $100 $1,400 $800 $5,000 $8,000 $25
57 59
$35 $35
$25,000 $30,000
53 40 26 20 14 32 40 26 34
$35 $350
$25,000 $25,000 $ 100,000
$500
$ 100,000 $ 2,500
$10
$60
$25
$125
$25 $10 $30 $100 $25
$100 $25,000 $ 100,000 $3,600,000 $15,000 4 5 1 $10,000 $3,600,000 $ 500,000
26
$4
$16,000
$2
$1,600
13
Across segments, incentive programs are most common for furnaces, storage water heaters, boilers, tankless water heaters and programmable thermostats. In terms of dollar savings, generally customers benefit more when they opt for a whole system efficiency project, because they tend to find most generous incentives in a holistic approach and because their energy bills will be significantly lowered in the long run. In low income programs, the rebates tend to cover more, if not all, of the costs of new high efficiency appliances. Higher incentives are also prevalent in food service equipment, energy management systems, and custom commercial and industrial programs. Besides direct rebates, program administrators have developed various financial incentives to meet the needs of their market.
Table 11 shows examples of other types of incentive arrangements for residential efficiency improvements.
Table 11
OTHERFINANCIALINCENTIVEARRANGEMENTSINRESIDENTIALEFFICIENCYPROGRAMS
Furnaces 50%to80%ofreplacementcost 70%ofincrementalcostsformultifamily Enhancedrebatesfor300MBH(1,000Btu/Hr)furnaces IncentivesbasedonAFUElevels 50%to80%ofreplacementcost 70%ofincrementalcostsformultifamily Enhancedrebatesfor300MBH(1,000Btu/Hr)furnaces IncentivesbasedonAFUElevels
Boilers
ClothesWashers
Combinationgaselectriccustomersreceive$50 50%to80%ofcosts Higherrebatesforconversionsfromelectrictogashighefficiencystoragewaterheaterthanfrom agaswaterheater Higherrebatesforconversionsfromelectrictogashighefficiencytanklesswaterheaterthan fromagaswaterheater IndirectWaterHeater:$300perunit Averagevalueofproject DirectInstall Persquarefoot:$0.07to$0.5(attic,wall,floorinsulation);$0.3/sqftR19orhigher 1/3toofprojectcosts,plusfinancing 50%to100%ofprojectcost 50%ofcostupwithamaximumof$1,000or$1,250 70%upto$500orupto$750 75%upto$750forattics Sealing=70%ofinstalledcostupto$200 $1,000sealupincentivetocomplementstatewideincentive,ifcustomeracceptsfreehomeaudit DirectInstall Incrementalcost PerTherm:$1.72to$5.14 Basedonsquarefoot 75%ofcostcappedat$4,000 $450forgas;$600forgasandelectric $500to$1,000forthebuilder $900forEnergyStar
StorageWaterHeaters
TanklessWaterHeaters
WholeHomeRetrofit
NewWholeHome
Windows ProgrammableTStats
Persquarefoot:$0.95to$10(normally$1to$3persqft) PerWindow:$12.5window 100%ofcost Airfilters:$4coupons DrainWaterHeatRecovery:$150 Freeweatherizationkitstocustomersthatcompletedhomeenergyaudit IntegratedBoilerHotWaterUnit:$300 LowFlowShowerheads:$10;$6to$7formultiresidentialshowerheadprograms SeasonalCheckup:$50 Eachefficiencyrebaterequiresanenergyaudit,programmablethermostatandweatherizationkit
Other
As seen in Table 10, 11 and 12, incentive reimbursements for residential and commercial/industrial programs may consist of a set dollar amount per high-efficiency appliance unit or involve a percentage of total equipment replacement or project cost (often capped at a specific dollar amount). Other programs pay a specific dollar amount per square footage or unit of energy saved. In some programs, the reimbursement is a percentage of the incremental cost of acquiring the
higher efficiency product(s). In others, higher incentives are provided to larger volume customers that chose to upgrade to a higher efficiency level. Other measures that qualify for rebates in residential programs are dryers, infrared heating, indirect water heaters, combined products such space heating system and water heater, integrated boiler and water heater units, water heater wrap, drain water heat recovery units tied to gas hot water heating systems air filter coupons, low-flow showerheads, heating system check service, hearth products (fireplaces, pilotless hearth, duct and air sealing, wall and attic insulation), LivingWise conservation and efficiency school education program and energy savings kits, free weatherization kits upon completed Energy Audit, and free thermostats. In low income programs, incentives also cover combination space heat and water heater units and drain water heat recovery units. Several pay the full cost of high-efficiency measures, including appliance repairs and replacements. In other low-income programs, the utility pays up to 90 percent of the total installation costs, capped at a specific dollar limit. Still others include the full appliance replacement cost only if it can be justified by the energy savings, health and safety criteria or pass a Total Resource Cost test. Other measures that qualify for rebates in C & I programs include continuous modulating burners, modulating boiler controls, reset control, low-flow sprayer, ECM motors, refrigerators, aerators, low-flow showerheads, gas furnace and boiler tune-ups, vent damper, primary air dampers, steam trap service, free spray valves, insulation (roof, wall, floor), opaque shell insulation and air sealing leakage, multifamily residential showerhead program, drain water heat recovery units tied to gas hot water heating systems, dryers, integrated condensing boiler and water heater, gas cooling, combined heat and power, infrared heat, and solar heating. Many of the C & I programs are custom-analysis based, and financial incentives are awarded on a site-specific basis. Table 12 shows examples of other types of incentives arrangements for C & I efficiency improvements.
Table 12
OTHERFINANCIALINCENTIVEARRANGEMENTSINCOMMERCIAL/INDUSTRIALEFFICIENCYPROGRAMS
Furnaces $1.75/Mbtu $2to$3perkBtu/hr 30%to80%ofcost Upto40%ofcost PerkBtu/hr:$1to$4 PerMBtu/hr:$1to$4 PerMMBtu:$1,400to$2,000 15%to80%ofreplacementcost 25%ofcostupto$5,000 Upto40%ofcost Upto50%ofincrementalcost PerkBtu/hr:$0.5to$2.5 30%to80%ofreplacementcost Upto40%ofcost Upto50%ofincrementalcost $35iflessthan80rating;$150ifgreaterthan80
Boilers
StorageWaterHeaters
TanklessWaterHeaters
PerkBtu/hr:$1.5to$2 Upto50%ofincrementalcost Upto40%ofcost
Table 12 (continued)
OTHERFINANCIALINCENTIVEARRANGEMENTSINCOMMERCIAL/INDUSTRIALEFFICIENCYPROGRAMS
Roof,wall,floorinsulation:20%ofinstalledcostupto$10,000 Ductandairsealing:$420 Persquarefoot:$0.03to$0.15 DollarperTherm:$0.75to$1/Therm FirstYearsavings$5/Mcf PerDthSaved:$5to$7 Opaqueshellinsulationandairsealingleakage:30%ofcostupto$3,000 Upto50%ofcostwithacapof$1,000 Upto20%ofprojectcostwithamaximumof$10,000 Upto$100,000;ifannualizedthermusageislessthan40,000,thenmaximumincentiveif$50,000 Projectspaidona$/Therm,basedonactualenergysavingsachievedbythebuildingcomparedto code.Incentivedollarsareawardedonaslidingscale,basedonthepercentageofsavingsabove $1perThermupto50%ofprojectcost $5/McfforFirstYearsavings PerDthSaved:$5to$7 75%to100%ofincrementalcosts Projectspaidona$/Therm,basedonactualenergysavingsachievedbythebuildingcomparedto code.Incentivedollarsareawardedonaslidingscale,basedonthepercentageofsavingsabove code.
WholeBuildingRetrofit
NewWholeBuilding
Windows
Dollarpersquarefoot:$0.25to$2.25 Persquarebasiswithamaxof$2,500 $1/sqftwithalimitof2,5000sqft. Upto50%ofincrementalcost Upto40%ofcost Upto40%ofcost 80% Upto$100,000.Ifannualizedthermusageislessthan40,000,thenmaximumincentiveif $50,000. 30%to80% Upto40%ofcost DollarperTherm:$0.75to$1 RebatedthroughCIP Averagevalue Upto50%ofinstalledproject Upto50%ofincrementalcost Upto40%ofcost $5/Mcf;$7/Dth Lesserof50%ofprojectcostor$10/SavedDth Incentivedeterminedat150%ofcustomersFirstYearenergysavings DollarperTherm:$0.75to$1 Maximumprojectincentivepaymentnottoexceed$25,000or30%ofprojectcost.Ifsimple paybackofprojectislessthan1.5years,projectdoesnotqualify. Upto$100,000.Ifannualizedthermusageislessthan40,000,thenmaximumincentiveif $50,000. GasFurnaceTuneUp:$65 Freesprayvalves ModulatingBoilerControl:25%upto$5,000 ResetControl:$250 LowFlowShowerheads:$4.24 LowFlowSprayer:$25 BoilerTuneUp:$250to$750 SteamTraps:$25;50%ofequipmentcostor$2,500 SteamTrapService:Lesserof$50or50%ofservicecost IntegratedCondensingBoiler/WaterHeater:$1,000to$1,600 ECMMotor:$292/unit Refrigerator:$362/unit Aerators:$1.95 ContinuousModulatingBurners:25%ofequipmentcostor$15,000 VentDamper:50%ofequipmentcostor$500 Solarheating:$3perFirstYearestimatedThermsavings CustomProgram:Upto50% GasCooling:Upto$150,000 CombinedHeat&Power:Upto$500,000 Natural Gas Efficiency Programs Report 2010 Program Year, Page 22 of 67
ProgrammableTStats FoodServiceEquipment
EnergyMgmt.Systems
CustomIncentivePrograms
Other
SEPARATEINDUSTRIAL PROGRAM
Cost Effectiveness of Incentives Programs: Respondents were asked whether they assessed the cost effectiveness of each incentive program, which tests they used, and whether each program was found to be cost effective. Table 13 shows the number and percentage of programs that used a cost test generally and the number and percentage of programs that that passed cost effectiveness overall. According to the survey sample, 100 percent of the following programs were found to be cost effective for all measures: programmable thermostats, custom incentive programs, and energy management systems. This is followed by furnace programs (99 percent, or 66 of 69 programs) and food service equipment (97 percent). Ninety-five percent of boiler, new whole home/building, and window programs passed the cost test, followed by whole home/building retrofits (93 percent), clothes washers (88 percent), and tankless water heaters (85 percent).
Table 13
CUSTOMERINCENTIVEPROGRAMSANDCOSTEFFECTIVENESS
EEMEASURE
Furnaces(81Programs) Boilers(71Programs) Dishwashers(7Programs) ClothesWashers(21Programs) StorageWaterHeaters(74Programs) TanklessWaterHeaters(58Programs) WholeHome/BuildingRetrofits(49Programs) NewWholeHome/WholeBuilding(42Programs) Windows(19Programs) ProgrammableThermostats(53Programs) FoodServiceEquipment(39Programs) EnergyManagementSystems(24Programs) CustomIncentivePrograms(33Programs) OtherProducts(25Programs)
PROGRAMSTHAT USEDACOSTTEST 69 69 6 19 64 50 44 40 19 45 37 23 32 16
PERCENTAGE COSTTESTED 85% 85% 86% 90% 86% 86% 90% 95% 100% 85% 96% 96% 97% 64%
REPORTED TESTRESULTS 67 58 5 17 62 48 42 37 19 44 35 21 32 16
PASSEDC.E. TEST 66 55 4 15 57 41 39 35 18 44 34 21 32 14
PERCENTAGE
THATPASSED
99% 95% 80% 88% 92% 85% 93% 95% 95% 100% 97% 100% 100% 88%
Table 14, on the next page, provides more details regarding the specific cost test used per product or incentive program. The tests are categorized as participant cost test (PCT), ratepayer impact measure (RIM), societal cost test (SCT), total resource cost (TRC), utility cost test (UCT), multitest, or other. Table 14 also shows the number and percentage of programs that passed each of these tests. Many programs used multiple tests, while others used all five. Respondents were asked about the cost effectiveness of each incentive program overall and not by customer segment, even though recognizing that the cost-effectiveness of a specific incentive program may vary by customer segment. A brief description of the five common tests can be found on page 39. Across efficiency measures, the total resource cost test was the most commonly employed, ranging from 33 percent (for dishwasher programs) to 62 percent (boiler programs). On the other
hand, with one exception, the participant cost test was not used. Also less used were the ratepayer impact measurement and societal cost test.
Table 14
COSTEFFECTIVENESSUSEDPERGASEFFICIENCYINCENTIVEPROGRAMANDRESULTSPERTEST
(NUMBEROFPROGRAMS&PERCENTAGE)
EEMEASURE TALLY TYPE
SpecificTestAdministered
PCT RIM SCT TRC UCT
MULTI OTHER
PassedSpecificTest
ALL PCT RIM SCT TRC UCT
MULTI OTHER
ALL
FURNACE 81PROGRAMS BOILER 71PROGRAMS DISHWASHER 7PROGRAMS CLOTHES WASHERS 21PROGRAMS STORAGEWATER HEATER 74PROGRAMS TANKLESSWATER HEATER 58PROGRAMS WHOLEHOMEOR BLDG.RETROFITS 49PROGRAMS NEWWHOLE HOME/BLDG. 42PROGRAMS WINDOWS 19PROGRAMS PROGRAMMABLE THERMOSTAT 53PROGRAMS FOODSERVICE EQUIPMENT 39PROGRAMS ENERGYMGMT. SYSTEM 24PROGRAMS CUSTOM INCENTIVEPROG. 33PROGRAMS OTHER 25PROGRAMS
# % # % # % # % # % # % # % # % # % # % # % # % # % # %
1 1% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0% 0 0%
3 4% 0 0% 0 0% 0 0% 3 5% 0 0% 0 0% 1 3% 0 0% 3 7% 0 0% 0 0% 0 0% 1 6%
3 4% 3 5% 0 0% 0 0% 3 5% 1 2% 2 5% 1 3% 0 0% 2 4% 2 5% 1 4% 3 9% 1 6%
35 51% 37 62% 2 33% 7 37% 35 55% 28 56% 23 52% 22 55% 8 42% 24 53% 22 59% 9 39% 18 56% 6 38%
6 9% 6 10% 0 0% 4 21% 6 9% 6 12% 4 9% 4 10% 4 21% 4 9% 4 11% 4 17% 5 16% 1 6%
11 16% 6 10% 2 33% 5 26% 10 16% 9 18% 7 16% 6 15% 4 21% 6 13% 5 14% 5 22% 4 13% 4 25%
2 3% 2 3% 0 0% 0 0% 0 0% 0 0% 3 7% 1 3% 0 0% 2 4% 1 3% 0 0% 1 3% 1 6%
6 9% 4 7% 1 17% 1 5% 5 8% 4 8% 3 7% 2 5% 3 16% 3 7% 1 3% 2 9% 1 3% 2 13%
1 100% 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a 0 n/a
3 100% 0 n/a 0 n/a 0 n/a 3 100% 0 n/a 0 n/a 1 100% 0 n/a 3 100% 0 n/a 0 n/a 0 n/a 1 100%
3 100% 3 100% 0 n/a 0 n/a 3 100% 1 100% 2 100% 1 100% 0 n/a 2 100% 2 100% 1 100% 3 100% 1 100%
34 97% 34 92% 1 50% 5 71% 31 89% 23 82% 20 87% 20 91% 7 88% 24 100% 21 95% 9 100% 18 100% 4 67%
6 100% 6 100% 0 n/a 4 100% 6 100% 6 100% 4 100% 4 100% 4 100% 4 100% 4 100% 4 100% 5 100% 1 100%
11 100% 6 100% 2 100% 5 100% 10 100% 8 89% 7 100% 6 100% 4 100% 6 100% 5 100% 5 100% 4 100% 4 100%
2 100% 2 100% 0 n/a 0 n/a 0 n/a 0 n/a 3 100% 1 100% 0 n/a 2 100% 1 100% 0 n/a 1 100% 1 100%
6 100% 4 100% 1 100% 1 100% 4 80% 3 75% 3 100% 2 100% 3 100% 3 100% 1 100% 2 100% 1 100% 2 100%
While all the efficiency incentive programs passed the PCT, RIM, SCT and UCT tests, the more instructive survey answers relate to the TRC test. According to responses regarding the TRC, 100 percent of programmable thermostat, custom incentive and energy management system programs were found to be cost effective (24, 18 and 9 programs, respectively). Other programs passed the
TRC as follows: furnace (34 of 35 programs), food service equipment (21 of 22), boiler (34 of 37), new whole home/building (20 of 22), storage water heater (31 of 35), windows (7 of 8), whole home/building retrofit (20 of 23), tankless water heater (23 of 28), and other incentive programs (4 of 6).
Efficiency Loans
As an alternative approach to reducing up-front costs, a number of efficiency programs provide customers with the option of financing their energy efficiency upgrades. Twenty-two percent (24 of 110 programs) provide customers access to loans, and of those, 92 percent (or 22 programs) offer financing in conjunction with other incentives (e.g., rebates). Eighteen of the 24 programs have residential energy efficiency loan programs, 16 have commercial, and 12 have industrial loan programs. Of these, six offer loans to all customer segments. Programs may offer interest-free loans, interest rate reduction programs, loans with interest, or simply access to loans by a third party. Of the 24 programs, nine (or 38 percent) have interest-free loans, eight (or 33 percent) offer to buy down the interest on the loan, and three (or 13 percent) include both types of financing. Another 17 percent (four programs) have other financing arrangements, such as below-market fixed rates and other annual percentage rates. A number of programs offer 10-year interest free financing for comprehensive whole house projects which are preceded by a home energy audit as a complement to statewide efficiency program incentives. Similar programs are offered to comprehensive C & I energy improvement projects. Others offer customers the choice between statewide rebates and utility financing. Several ratepayer-funded energy efficiency financing programs integrate loan repayment into the customers monthly utility bill as a monthly installment repayment plan. Such on-bill financing (or pay-as-you-save) arrangements exist in nine of the loan programs (or 39 percent). In other cases, where the utility does not finance efficiency purchases, the financing comes through a nonregulated affiliate and is billed through the standard gas bill. Thirty-five percent of loan programs (8 of 23) are administered in house, while 65 percent (or 15 programs) are processed by a third party. In another case, the gas utility administers the loan, while the electric utility actually funds the financing.
Table 17
NATURALGASEFFICIENCYFINANCINGPROGRAMS
24PROGRAMS
SEGMENT
Residential Commercial Industrial
PROGRAMS 18 16 12
LOANTYPE
InterestFree InterestRateBuyDown Both Other
PROGRAM PERCENTAGE 38% 33% 13% 17%
LOAN ADMINISTRATOR
InHouse Thirdparty Both
PROGRAM PERCENTAGE 33% 63% 0%
Internal Tracking Systems: When asked whether they used an internal system to track natural gas efficiency programs, 71 of 108 respondents (or 66 percent) indicated that they did. Of these, 70 percent developed their tracking system in house, 10 percent used a specialized off-the-shelf tracking package, and 18 percent had their tracking software customized by a vendor. Another one percent used a combination of in-house and vendor-customized systems (see Table 18).
Table 18
INTERNALPROGRAMTRACKINGSYSTEMS
71PROGRAMS
DevelopedInHouse SpecializedOfftheShelf CustomizedbyVendor BothInHouse&VendorCustomized
PROGRAMS 50 7 13 1
PERCENT 70% 10% 18% 1%
Efficiency Program Marketing

Natural gas efficiency programs are promoted via an array of marketing efforts in the form of collateral materials, internet tools, direct outreach, trade and home show promotions, training, print ads, press releases, radio commercials and/or TV and cable advertisements. Ninety-five percent of programs (105 of 110) use a number of these efficiency marketing approaches. Twenty-two of these programs employ all outreach tools. As seen in Figure 4, the most widely adopted outreach method is the distribution of collateral materials, such as brochures and bill inserts (97 percent of programs), followed closely by internet tools (93 percent), and direct contact (91 percent).
Figure 4
Natural Gas Efficiency Program Marketing and Advertising
Total = 105 programs that include one or more activity
120
Marketing and Advertising Activities
100 80 60 40 20
102
98
96 83 79 66 62 56 39 17
Gas Ef f iciency Program Characteristics
Respondents were asked to identify which of two audiences (end users and/or trade allies) they sought to reach with each marketing approach, realizing that it is more difficult to identify or segregate a target audience via internet tools, print ads, and trade shows. As shown in Table 19 on the next page, in all marketing categories, a greater percentage of programs directed their efforts toward end users than those targeting trade allies. One exception is with training programs: 57 percent of these programs are geared toward end users, while 75 percent are developed for trade allies. While recognizing that the success of each approach varies per target market and that success rankings tend to be subjective, we asked respondents to rank the success of each combined effort, where a rating of 1 signifies most successful and 10 indicates least successful. Table 19 shows the number of respondents that rated each approach per target audience, the average success ranking of each approach, and the percentage of rankings that fall within one of three success ranges (high, medium and low). The marketing tools are ordered according to success ranking, starting with the most successful according to survey response. For end users, direct outreach and collateral materials were ranked highest, followed by print ads and the internet. With respect to trade allies, a small number of respondents ranked other approaches highest. More representative and highly ranked were collateral materials, followed by direct outreach, trade and homes shows, and internet tools. Other marketing approaches include contractor/vendor promotions, elementary school conservation education outreach (indirect outreach to parents), social media, sponsorship of collegiate sports and professional basketball teams, billboards, workshops, truck wraps, giveaways, full newspaper articles covering programs, energy fairs, and trade/industry association memberships and sponsorships. Other examples include TV coverage of energy efficiency events, a local cable community TV program, and direct mail to area HVAC contractors with email updates regarding programs. Also cited as very successful were outreach to local real estate offices and to various community groups (including environmental commissions, green fairs and rotaries).
Table 19
SUCCESSOFMARKETINGAPPROACHESANDTARGETAUDIENCE
MARKETINGTOENDUSERS
MarketingApproach Programs UsingthisTool ProgramsTargetingEnd Users Numberof Programs Percentage Numberof Ratings
SuccessRatings
AverageSuccess Ranking HighRanking MidRanking LowRanking
1>4 57% 56% 31% 31% 31% 23% 21% 15% 33% 5%
46 21% 24% 51% 44% 41% 54% 49% 60% 19% 58%
>6 21% 20% 18% 26% 28% 23% 30% 26% 48% 37%
Direct Outreach Collateral Materials Print Ads Press Releases Internet Other Trade & Home Shows Radio Ads TV/Cable Training
96 102 79 62 98 17 83 66 39 56
82 95 75 54 91 16 77 62 37 32
85% 93% 95% 87% 93% 73% 93% 94% 95% 57%
70 80 61 39 75 13 61 47 27 19
3.9 3.9 4.6 4.7 4.8 4.9 5.2 5.4 5.5 6.3
MARKETINGTOTRADEALLIES Marketing Approach Other Collateral Materials Direct Outreach Trade & Home Shows Internet Print Ads Training Press Releases Radio Ads TV/Cable
Programs UsingthisTool ProgramsTargetingTrade Allies Numberof Percentage Programs
SuccessRatings
Numberof Ratings AverageSuccess Ranking HighRanking 1>4 MidRanking 46 LowRanking >6
17 102 96 83 98 79 56 62 66 39
9 48 57 41 47 24 42 18 12 7
53% 47% 59% 49% 48% 30% 75% 29% 18% 18%
6 42 49 32 39 18 31 13 8 4
1.8 3.9 4.3 4.4 4.5 4.8 5.0 6.0 6.3 9.0
100% 50% 57% 34% 38% 22% 52% 23% 0% 0%
0% 33% 6% 44% 31% 56% 6% 23% 50% 0%
0% 14% 37% 22% 31% 22% 42% 46% 38% 100%
In terms of funding for efficiency marketing, 89 percent of respondents (87 of 98) indicated they have a set budget specifically for promotional activities. They also relayed what percentage of their overall efficiency program budget was spent on advertising or marketing. Based on these responses, programs spent between 0.6 percent and 60 percent of natural gas efficiency program dollars on advertising/marketing. The median spending was five percent of total efficiency program funds.
Table 20 breaks down program promotional spending into ranges as a percentage of total program dollars. As shown, 45 percent of programs (39 of 87) spent more than five percent of their efficiency program budget on marketing and outreach. Only six percent used more than 25 percent of their overall efficiency program dollars for marketing.
Table 20
MARKETINGFUNDSASAPERCENTAGEOFOVERALLNATURALGASEFFICIENCYPROGRAMBUDGET
87PROGRAMS
PERCENTAGERANGEOFPROGRAMBUDGET 1%orless 1%>5% 5%>10% 10%>25% 25%>50% Greaterthan50%
NUMBEROFPROGRAMS 7 41 17 17 4 1
Other Programs: Codes & Standards and Emerging Technology Demonstrations

Nine percent of respondents (10 of 110) indicated that their natural gas efficiency program includes a regulator-approved ratepayer-funded codes and standards advocacy program, which promotes improvements to building efficiency codes and to appliance standards. This is achieved through studies, drafting guidelines, research, expert testimony, stakeholder meetings, marketing, and compliance improvement activities. Some accomplish this by funding the codes and standards advocacy efforts within a statewide program. Others engage third-party vendors to provide regular training for codes compliance, or they fund energy efficiency continuing education credits for residential and commercial builders and contractors. Others work with dealers and contractors to encourage the use of high efficiency appliances (e.g., tank style water heaters with the highest energy factor ratings). Still others promote above code construction practices in their new construction efficiency programs. Fifteen percent (17 of 111) of respondents indicated that their natural gas efficiency program includes pre-commercial demonstrations of emerging technologies. Of the 17, three stated that their public utility commission requires such demonstrations. Another utility, based in Canada, voluntary participates in demonstration projects outside the energy efficiency budget.
II. Natural Gas Efficiency Program Funding and Impacts

This section describes utility funding for natural gas efficiency programs in the U.S. and Canada and the resulting annual energy saving impacts. Program year 2010 expenditures correspond to funding by 131 utilities for programs administered either by the utility or by a third party, such as a nonprofit public benefit organization or a state agency that runs a statewide program. A small part of 2010 expenditures were not finalized and will be subject to true-up. Approved budgets for 2011 represent planned funding for 128 programs (including two launched in 2011). Budget data were collected during spring and summer 2011; therefore, any budgetary changes made after this perioddue to newly approved programs or funding cutsare not reflected in this report. Some dollars reported for 2011 represent carryover of unspent funds from 2010. Respondents were asked to break down 2010 expenditures and 2011 budgets by customer class or segment. Where data were not available by segment, a slight percentage of respondents reported overall spending amounts in the Other category. Also where respondents were unable to break down spending for specific activities (such as evaluation, measurement and verification) by customer segment, they placed these dollar amounts under Other. Also some respondents were not able to separate low-income program dollars from residential program funds (either overall or for specific activities, such as education and online resources), and a small number of commercial program dollars were combined with residential program funds. All natural gas efficiency program dollars discussed in this report are sourced from ratepayers. Some efficiency program funds originate from other sources, such as utility shareholders and American Recovery and Reinvestment Act (ARRA) dollars. A small number of survey respondents did receive stimulus dollars and other non-ratepayer funds for efficiency programming, all of which have been excluded from this report. The scale of these non-ratepayer funds is very small compared to the ratepayer program dollars reported in this study: stimulus dollars amount to 0.12 percent of the total 2010 U.S. efficiency expenditures reported on the next page, and other nonratepayer funding represents 0.10 percent and 0.13 percent of 2010 U.S. program expenditures and 2011 budgets, respectively. Given that the reporting methodology varies among respondents, expenditure and budget data should be regarded as estimates rather than exact figures.
Natural Gas Efficiency Program Expenditures and Funding

In the United States, utilities spent $838 million in 2010 on natural gas efficiency programs. Also they have budgeted nearly $1.2 billion for the 2011 program. Program expenditures reached $914 million in North America (U.S. and Canada) in 2010. Cumulative North American program budgets are expected to approach $1.3 billion in 2011 (see Table 21). Appendix B and C present a breakdown of 2010 expenditures and 2011 budgets by state and region.
Table 21
NATURALGASEFFICIENCYPROGRAMEXPENDITURESANDBUDGETSBYCUSTOMERCLASS1
2010EXPENDITURES($MILLION)2 131PROGRAMS U.S.

$389.0 $180.4 $180.4 $19.6 $59.2 $9.4 $838.0
128PROGRAMS(2PLANNEDFOR2011)3
2011BUDGETS($MILLION)
CUSTOMERSEGMENT Residential LowIncome Commercial 5 Industrial Other EM&V 6 TOTAL 7

1
CANADA4
$16.6 $8.0 $19.3 $9.0 $22.4 $0.7 $76.1
N.AMERICA
$405.5 $188.4 $199.8 $28.7 $81.6 $10.1 $914.1
U.S.
$511.5 $222.6 $276.7 $36.4 $115.9 $26.5 $1,189.6
CANADA
$19.2 $18.5 $21.2 $13.2 $33.1 $0.4 $105.5
N.AMERICA
$530.6 $241.1 $297.9 $49.5 $149.0 $26.9 $1,295.0
Whilemostprogrambudgetscoincidewiththecalendaryear,23percentdonot,andthustheirprogramyearbeginsin onecalendaryearandendsduringthenext. Some2010fundsrepresentunspentdollarscarriedoverfromthe2009programyear.Carryoverfundsarenotincludedin 2011budgets.Notallreported2010expendituresrepresentafullyear,becauseanumberofprogramswerelaunched afterJanuary1,2010. About7percentof2011budgetshadnotbeenapprovedatthetimethedataweresubmittedtoAGA,oronlythehalfof theyearhadbeenapprovedwhilethebalanceremainedundertheprojectedstatus. AllcurrencyisreportedinU.S.dollars.ThisreportusestheJuly8,2011exchangerateof0.9544USD=1CAD.
4 5
AsmallpercentageofcommercialfundsrepresentcombinedC&Idollarsasfollows:about6percentof2010commercial expendituresintheU.S.and5percentinNorthAmerica,andabout8percentof2011commercialbudgetsintheU.S.and 7percentinNorthAmericaincludeindustrialfunds. Lessthan1percentoffundsacrosssegmentsrepresentEM&VfundsnotincludedintheEM&Vcategory. Subcategoriesmightnotaddupexactlytoreportedtotalsduetorounding.
6 7
Figure 5 presents natural gas efficiency program funds from 2007 through 2011. This comparison is intended for illustrative purposes, since spending growth cannot be entirely attributed to new and expanded programs but also to differences in survey samples from one year to the next.
Figure 5
Natural Gas Efficiency Program Expenditures in the U.S. and Canada

$1,400 Canada $1,200 UnitedStates
$1,295 million
128programs
$1,000
$870 million
108programs
$914 million
131programs
US Dollar (million $)
$800
$632 million
92programs
$600
$329 million
$400 53programs
$200
$0
2007
2008
2009
2010
2011 Budget
Gas Efficiency Program Funding and Impacts
Program funding in North America increased by 5.1 percent from 2009 to 2010 and is expected to grow 42 percent in 2011. In the United States, program funding grew 4.4 percent in 2010 from $803 million, and a 42 percent increase is expected in 2011. As shown, natural gas efficiency program spending clearly leveled off in 2010 relative to the 42 percent growth seen from 2008 to the 2009 program year. In fact, a comparison of 2010 actual efficiency expenditures to the aggregate 2010 budget that was reported during the previous survey cycle (for all companies participating in both surveys) indicates that U.S. programs spent only 73 percent of the $1.14 billion 2010 efficiency program budget. In North America, programs spent 74 percent of the $1.23 billion budget that had been reported for the 2010 program year. The most obvious contributing factor to this decreased spending rate is the economic downturn that hit in late 2008 of and the very slow recovery since then.
A look at 2010 natural gas efficiency program expenditures across sectors shows that North American utilities apportioned 44 percent of funding for residential programs, 21 percent for lowincome, 22 percent for commercial, three percent for separate industrial programs, and nine percent for other program activities (see Figure 6).
Figure 6
2010 Natural Gas Efficiency Program Expenditures by Customer Class 131 programs in N. America = $814.1 million OTHER $91.7 million Residential $405.5 million
9%
Industrial $28.7 million
44%
3%
22% 21%
Commercial $199.8 million Low-Income $188.4 million
Gas Efficiency Program Funding and Impacts
The other category includes expenditures that were not provided by customer segment. Also in this category are programs that cross-cut residential and non-residential customers segments. These include baseline studies and market research (including technology and market trials and pilot programs), planning and project development, consultation and cost effectiveness analyses, EM&V, market transformation programs, marketing (including statewide marketing and special projects such as non-profit kits), non-program specific administration costs (e.g., salaries, transportation, rebate processing), information systems upgrades (including tracking systems), conservation and efficiency education (e.g., school-based, online calculators, community education pilot), efficiency and technology training, and regulatory and state oversight expenses (e.g., thirdparty alternative filings). Also included under other expenses are carry-over funds from prior program year, government partnerships, codes and standards, product development, emerging technologies, demand-side management coordination and integration, workforce education and training, state home improvement and conservation loan subsidies, financing programs, financial audit fees, building operator certification, solar thermal water heating, renewable energy, and agricultural programs.
Figure 7 shows the distribution of natural gas efficiency program funding among sources in 2010. Ninety percent of programs are funded solely by ratepayers (via base rates, system surcharges or natural gas efficiency tariffs), one percent by shareholders only, seven percent by shareholders and ratepayers, and three percent via other arrangements.
Figure 7
Natural Gas Efficiency Program Funding Sources

(112 programs)
Ratepayers (101 programs) Other Arrangements (3)
3%
7% 90%
Ratepayers & Shareholders (8)
Gas Ef f iciency Program Funding and Impacts
Based on 98 survey responses, utilities disbursed from 0.0007 to 13.9 percent of net natural gas distribution revenues (net of gas costs) for natural gas efficiency programs in 2010. The median spending was 1.2 percent of net distribution revenues. Of the 98 responding companies, 40 used less than one percent of net distribution revenues for natural gas efficiency programs, 46 used one percent to less than five percent, and 12 spent five percent or more.
Natural Gas Efficiency Program Savings Impacts

Estimated 2010 annual natural gas savings impacts were reported for 121 programs by customer class. Respondents were requested to report energy savings realized by gas efficiency measures during the 2010 calendar. This includes calendar year savings from natural gas efficiency measures already in place on the first day of the year (i.e. installed prior to 2010) as well as incremental savings realized from new measures implemented during the year. A small number of respondents were limited by the manner in which they track and report energy savings and thus did not provide annualized savings as defined above (with pre-existing measures and participation taken into account) but rather reported only incremental, or first-year, Therm savings (representing roughly 4 percent of the energy savings overall). Data were not available for a number of respondents, either because savings are not tracked or not yet available for 2010. In some of these cases, estimates were provided based on prior year data. While the majority of respondents provided calendar year savings accumulated in 2010,
some were able to report only for the most recent program year (with, for example, some program months falling in 2009 and some in 2010). Where data were not available by segment, a slight percentage of respondents reported overall savings in the Other category. Respondents were also asked for net impactsthat is, to exclude free riders, spillover, savings due to government mandated codes and standards, reduced usage owed to weather or business cycle fluctuations, and reduced usage because of natural operations of the marketplace (e.g., higher prices). Respondents provided net impacts corresponding to 64 percent energy savings in the U.S. and 71 percent of energy savings in North America, respectively. The balance of energy savings represents gross savings. Many respondents report deemed savingsa set calculation of savings per measure, developed pre-installation, with built-in assumptions regarding free ridership and other specifications. Some respondents were unable to separate low-income program savings from overall residential program savings, while others combined commercial program savings with residential impacts. Still others included savings for multi-family programs with C&I program savings. These combined categories represent a very small percentage of the data. Given that the reporting methodology varied among respondents, natural gas savings data should be regarded as estimates rather than exact figures. As shown in Table 22, in 2010 U.S. utilities saved nearly 808 million Therm (or 80.8 trillion Btu) through natural gas efficiency programs, thus avoiding 4.8 million metric tons of carbon dioxide emissions (CO2). Natural gas savings in North America were about 1.35 billion Therm (or 134.6 trillion Btu), the equivalence of 7 million metric tons of avoided CO2 emissions. For a breakdown of savings impacts by region, see Appendix D.
Table 22
2010NATURALGASEFFICIENCYPROGRAMSAVINGSIMPACTSBYCUSTOMERCLASS
(MILLIONTHERM)121PROGRAMS SECTOR Residential LowIncome Commercial Industrial Other 1 TOTAL 2
1
UNITEDSTATES
319.2 48.3 237.9 162.2 40.5 808.2
CANADA
112.5 122.6 260.9 40.6 1.3 537.8
N.AMERICA
431.7 170.9 498.8 202.8 41.8 1,346.0
TheothercategoryrepresentscrosscuttingprogramssimilartothosediscussedunderProgramExpenditures
onpage34. Subcategoriesmightnotaddupexactlytoreportedtotalsduetorounding.
Figure 8 shows natural gas efficiency program savings from 2008 through 2010. This comparison is for illustrative purposes, because this growth cannot entirely be attributed to new and expanded programs but also to differences in survey samples from one year to the next.
Figure 8
Natural Gas Efficiency Program Savings Impacts in North America

Canada
134.6 Tbtu
140.0 121programs
United States
120.0
100.0
89.8 Tbtu 81.0 TbtuR

98programs 86programs
Trillion Btu
80.0
60.0
40.0
20.0
0.0
2008
2009
2010
Gas Ef f iciency Program Funding and Impacts
Natural gas efficiency program savings grew by nearly 53 percent in 2010 to 80.8 trillion Btu (from 52.9 trillion Btu in 2009). Savings in North America increased nearly 50 percent (from 89.8 trillion Btu in 2009 to 134.6 trillion Btu in 2010). These growth rates are tremendous, particularly when compared to the 2008-2009 one-year growth rates of 9.3 percent and 10.9 percent, respectively for the U.S. and North America. This growth in savings might also be surprising when considering low growth in spending from 2009 to 2010, as mentioned earlier. One likely explanation is the lag that often occurs between efficiency program outlays and the realization of savings associated with these program investments. For example, in 2009 U.S. programs invested $802.6 million dollars (a 42 percent growth from prior year spending), and in North America, spending reached $869.6 million (a 38 percent increase from 2008. Also of the 121 programs for which 2010 energy savings are reported, 22 were launched in 2009. Thus, these new programs account for some of this growth, particularly since new programs often ramp up implementation gradually, and for many programs, savings are evaluated only after a one-year implementation period. Finally, as discussed earlier, 43 percent of respondents reported that they expanded their efficiency programs in 2010. A look across segments at 2010 natural gas efficiency in the United States shows that 39 percent of energy savings are attributed to residential programs, 6 percent to low-income activities, 29 percent to commercial programs, and 20 percent to industrial accounts. Five percent of U.S.
natural gas savings is classified as other, representing data not allocable by customer class and including estimated savings for education, general outreach, codes and standards, and pilot programs. In North America, residential program savings account for 32 percent of overall savings, low income program savings for 13 percent, commercial savings for 37 percent, and industrial savings for 15 percent. Three percent of N. American natural gas savings is classified as other (see Figure 9).
Figure 9
2010 Natural Gas Efficiency Program Savings by Customer Class

121 Programs in N. America -- 1,346 million Therm (134.6 trillion Btu)
Other 41.8 million Therm
3% 15%
Industrial 202.8 million Therm
32%
Residential 431.7 million Therm
13%
Low Income 170.9 million Therm
37%
Commercial 498.8 million Therm Gas Ef f iciency Program Funding and Impacts
In the U.S. annual natural gas savings per efficiency program participant averaged 9.9 percent for residential participants and 11.7 percent overall. Natural gas savings per year averaged 187.7 Therm per U.S. customer overall (compared to an average 122 Therm/year in 2009) and 75.8 Therm per residential customer per year (compared to an average 69 Therm/year in 2009). Residential energy savings translate to average cost savings per customer of $62 on annual energy bills.7 This contrasts with 2009 average avoided costs savings of $83 annually per residential customerseven though average residential energy savings have increaseddue to lower residential end-use gas prices in 2010.
Natural gas efficiency program data for both participant counts and annual savings were available for 88 U.S. programs. Average cost savings were derived from survey data for the 88 programs as well as Energy Information Administration (EIA) consumption data per company by end use and EIA national average natural gas residential end-use price (2010 data not yet available). Natural Gas Efficiency Programs Report 2010 Program Year, Page 37 of 67
III. NATURAL GAS EFFICIENCY PROGRAM PLANNING AND EVALUATION

Survey respondents were asked to describe their approach to natural gas efficiency program planning, measurement and evaluation. Forty-four percent of respondents (48 of 109) completed a full scale or smaller market assessment (or some form of efficiency potential, baseline, or feasibility study) before implementing their natural gas efficiency programs. The majority of respondents include an evaluation, measurement and verification (EM&V) component in their natural gas efficiency program. However, not all were able to report EM&V expenditures and budgets for one of the following reasons: EM&V funds form part of the administrative budget, in-house evaluations are covered under other program expenses, incremental costs are not itemized, no evaluation report is due this program year, and contract negotiations with third-party EM&V vendors are ongoing. Expenditures for 2010 EM&V were obtained for 63 programs and 2011 EM&V budgets were provided for programs. EM&V expenditures exceeded $9 million in the U.S. in 2010 and are estimated to approach $27 million in 2011a 183 percent increase. In North America, 2010 EMV spending surpassed $10 million and is expected to approach $27 million in 2011 (see Table 23). These expenditures were lower than in 2009.
Table 23
EVALUATIONMEASUREMENT&VERIFICATIONEXPENDITURESANDBUDGETS
REGION UNITEDSTATES CANADA N.AMERICA
2010EXPENDITURES($) 63PROGRAMS 2011BUDGET($) 58PROGRAMS
$9,381,795 $736,784 $10,118,579
$26,538,195 $391,986 $26,930,181
In 85 percent of programs (88 of 103), the utility is responsible for conducting the impact evaluation, and in 14 percent the evaluation is under the purview of the regulator. One program reported a shared responsibility between utility and regulator. When the utility is the responsible party, the evaluation is conducted by a consultant in 58 percent of programs (52 of 89), by inhouse staff in 29 percent (or 26 programs), and by both internal staff and outside agent in 12 percent (or 11 programs). In the latter case, in-house staff may oversee and coordinate multiple independent evaluation consultants that are conducting impact evaluations and process assessments. Ninety-four percent of respondents (103 of 109) indicated that they are required to report natural gas efficiency program impacts at regular intervals to their regulator or other authority. Others are requested to submit for informal evaluations instead of a formal impacts report. When asked how often evaluators must submit a program report, respondents selected one or more timeframes, depending on the type of evaluation and intended recipient.
Table 24 shows the reporting cycles required by regulators for natural gas efficiency program impact evaluations. Seventy-nine percent of respondents are required to submit an annual report at minimum. Some are required to report more frequently (e.g., semi-annually, quarterly, and/or monthly), while others report less frequently (e.g., once in three years, in five years or in six years). Thirty percent of respondents are required to report net gas savings impacts to regulators or another state authority, while 48 percent report gross savings and 22 percent include both in their report.
Table 24
EFFICIENCYPROGRAMREPORTINGREQUIREMENT
(103programswithoneormorereportingcycles)
REPORTINGFREQUENCY Monthly Quarterly Annually Alloftheabove Other
PROGRAMS 20 30 81 11 12
When assessing annual energy savings derived from direct impact natural gas efficiency programs, 50 percent of respondents (53 of 105) determine savings at the individual program level, four percent (or 4 programs) at the overall portfolio level, and 46 percent (or 48 programs) at both. Twenty percent of respondents (22 of 109) also determine energy savings that are achieved from indirect impact programs (such as contractor certification, efficiency and conservation education, energy audits, and contractor or building operator training). Of the 96 natural gas efficiency programs for which cost effectiveness is evaluated, 35 percent (or 34 programs) are assessed at the individual program level, 11 percent (or 11 programs) at the portfolio level, and one percent (or one program) at the customer segment level. Thirty-one percent (30 programs) determine cost effectiveness for both individual program and the portfolio overall, and 20 percent (19 programs) conduct tests at all three levels. In several programs, costeffectiveness tests are conducted at the measure level, including custom measures. In other cases, the investor owned utilities are required to conduct various cost-benefit tests at multiple levels, and the small and multi-jurisdictional utilities within the same state are allowed to mimic their program measures and savings levels.
Table 25 shows how respondents answered when asked to identify all tests used to determine cost-effectiveness. The most prevalent test is the Total Resource Cost test (TRC), used by 84 percent of respondents (81 of 96), whereas the Societal Cost Test was least usedby only 26 percent of respondents. Sixteen percent (or 15 respondents) reported using all five tests.
Table 25
TESTSUSEDTODETERMINENATURALGASEFFICIENCYPROGRAMCOSTEFFECTIVENESS8
96programswithoneormoretest
TESTTYPE ParticipantTest(PCT)
Calculatesquantifiablecosts(e.g.,outofpocketexpensesofparticipatinginprogram)andbenefits (e.g.,reductioninutilitybill,rebatepayments,taxcredits)toparticipatingcustomers
PROGRAMS 45
RatepayerImpactMeasure(RIM)
Appliesonlytoutilityprogramsmeasuringimpactonallconsumerbills/ratesbecauseofchangesin utilityrevenuesandoperatingcostsduetoprogramimplementation
40
SocietalCostTest(SCT)
BroaderversionofTRCadoptingasocietalperspectivemeasuringnotonlyparticipantsandutilitys costsbutalsoexternalitycostandbenefits(e.g.,environmentalimpacts)
25
TotalResourceCost(TRC)
Measuresnetprogramcostsincludingbothparticipantsandutilityscosts(e.g.,equipmentand installation,operationandmaintenanceandotherrelatedcostsofparticipantandutility)andbenefits (e.g.,avoidedsupplycosts,naturalgasdeliverycostreductions,taxcredits)
81
UtilityCostTest(UCT)
NarrowerversionofTRCexcludingparticipantcostsandmeasuringnetcostsincurredbyprogram administrator(e.g.,customerrebatesandotherfinancialincentives)attheutility(UCTapplies)orat otherorganization(PACapplies)
59
Nineteen percent of respondents (21 of 108) indicated that a reduction of greenhouse gas (GHG) or carbon emissions is a performance target for their natural gas efficiency program. Of the 21, twelve respondents (or 11 percent) track such reductions. Two others do not consider emissions reduction a performance measure, yet they track it and, in some cases, report their findings. Three others, who do not track emission savings, reported that they do consider them when selecting cost effective measures. When asked how they calculate energy efficiency gains for specific programs or measures, respondents indicated that they use source-to-site energy measurement in about eight percent of programs (8 of 104), and site-only measurement in 91 percent of programs.9 One respondent reported using both types of measurement. Seventeen percent of the respondents that measure source efficiency are guided by regulatory or legislative requirements, while 83 percent do so because of available recourses.
For a thorough description of cost tests, see Model Energy Efficiency Program Impact Evaluation Guide, A Resource of the National Action Plan for Energy Efficiency, November 2007, www.epa.gov/cleanenergy/documents/evaluation_guide.pdf Source energyalso known as full fuel cycle analysisis a more accurate measurement of efficiency. Site energy analysis accounts for energy used or consumed only by the end-user at the usage site. On the other hand, a full fuel cycle analysis takes into account not only onsite energy consumption but also consumption and losses during the production, generation, transmission and distribution cycles. This allows for a realistic comparison of relative efficiency among different technologies, especially when comparing the efficiency of natural gas applications from source to site with that of other fuels. Natural Gas Efficiency Programs Report 2010 Program Year, Page 40 of 67
Forty-four percent of those programs that test site efficiency use this approach because of legislative or regulatory requirements, 40 percent because of available resources, and 16 percent for other reasons. These reasons include the following: 1) common practice for utility-sponsored programs, 2) consistency with other utilities in same jurisdiction, 3) a limitation to use deemed savings in the regulator-developed calculation, 4) in compliance with Energy Star standards, 5) current practice for statewide programs, 6) believed to be a true measurement of efficiency, and 7) does not have regulatory approval.
IV. NATURAL GAS EFFICIENCY REGULATORY REQUIREMENTS AND COST RECOVERY TREATMENT
This section describes some of the regulatory and legislative requirements and allowances that govern natural gas efficiency programs in the United States, including state potential studies, efficiency program spending requirements, rules for low-income programs, recovery of direct program costs, lost margin recovery, financial incentives for well-performing programs, carbon offset programs, and fuel switching to natural gas. Data were provided for 108 U.S. programs, although not all respondents answered all questions.10
Potential Studies
Every so often state policy makers conduct potential studies through which they gather key data to inform their decisions pertaining to energy efficiency policies and objectives. The data might include baseline energy usage and other market statistics, economic outlooks, energy forecasts, implementation costs, and cost-benefit assessments for various efficiency program components. These studies help decision makers set achievable goals (in terms of investments, outcomes and timeframes), quantify energy efficiency as a resource, determine funding levels to attain goals, and forecast the long-term savings potential of energy efficiency investments.11 According to survey responses, market studies were conducted in twenty-one states to assess the economic and efficiency potential of implementing natural gas efficiency programs. New Potential studies are in progress in seven states. Table 26 shows the year in which the most recent studies were completed for each of the twenty-one states.
Table26
STATEENERGYEFFICIENCYPOTENTIALMARKETSTUDIES
COMPLETEDIN21STATES&INPROGRESSIN7STATES
MOSTRECENTYEARFORCOMPLETEDSTUDY 2004 2005 2007 2008 2009 2010 NEWSTUDIESINPROGRESS
NUMBEROFSTATES 1 3 1 5 5 6 7 UT
STATELIST
FL,IN,NM OR CO,IA,MI,NH,NJ, CA,CT,MN,OH,PA IL,MA,NY,VA,WA,WI AZ,CA,IN,MI,MO,NH,VT
10
Appendix A shows natural gas efficiency program practices and regulatory requirements by state and for Canada. This includes market assessment studies, mandated utility funding for natural gas efficiency programs, requirements for low-income residential programs, approved recovery for direct program costs and lost margins, utility performance incentives, fuel switching and source-to-site energy measurement. More information is provided in a Guide for Conducting Energy Efficiency Potential Studies, A Resource of the National Action Plan for Energy Efficiency, November 2007, http://www.epa.gov/cleanenergy/documents/suca/potential_guide.pdf Natural Gas Efficiency Programs Report 2010 Program Year, Page 42 of 67
11
Natural Gas Efficiency Program Requirements and Policy Goals

Many state policy makers have mandated that utilities invest in natural gas efficiency programs. Twenty-eight states require utilities to fund efficiency programs, by way of regulatory order (in 18 states), legislative bill (in 13 states) or through both regulation and legislation (in 15 states). The goals that drive efficiency program funding requirements are energy conservation and savings (76 programs in 28 states), customer dollar savings or bill reduction programs (38 programs in 19 states), greenhouse gas or carbon emission reductions (30 programs in 13 states), and green jobs creation (15 programs in eight states). Twenty states have set more than one goal, of which five pursue all four targets. Other goals were stipulated in two other programs (two states), one of which is to reduce gas usage for low income customers (see Table 27).
Table27
POLICYGOALSGOVERNINGEFFICIENCYPROGRAMIMPLEMENTATION
GOALS IncreaseEnergySavings ReduceCustomerEnergyBills ReduceGHGorCarbonEmissions CreateGreenJobs OtherGoals NUMBEROF PROGRAMS 76 27 30 15 2
NUMBEROFSTATES
28 19 13 8 2
Rate Structures and Regulatory Treatment Aligned with Utility and Energy Efficiency Goals
An investor-owned utility has an intricate accounting and rate setting methodology to recover its costs. Many resources explain utility accounting and rate design in depth.12 For the purpose of this report a simplified, brief description is provided as background for relaying the policies that have been progressively adopted to protect utilities from losses associated with energy conservation practices and to incentivize them to invest in energy efficiency programs. When setting rates, an investor-owned utility negotiates with its regulator (public utility/service commission) what it is permitted to charge its customers in order to be able to continue to meet its obligation to serve its customer base. These rates are calculated to match the revenue requirement of the utility, allowing it: 1) to recover its incurred costsboth variable and fixed, 2) to pay the interest cost on its capital debts, and 3) to earn a return for shareholders on investments. The profit margin is approved by the regulator who sets the rate of return (or percentage) the utility may earn on its equity (a return on equity or ROE).
12
For a thorough explanation of utility rate-design policies that support utility commitments to efficiency programs, see Aligning Utility Incentives with Investment in Energy Efficiency, A Resource of the National Action Plan for Energy Efficiency, November 2007, http://www.epa.gov/cleanenergy/documents/suca/incentives.pdf. Also visit the AGA Rate Roundup: A Periodic Update on Innovative Rate Designs web page: http://www.aga.org/ourissues/RatesRegulatoryIssues/ratesregpolicy/rateroundup/Pages/default.aspx Natural Gas Efficiency Programs Report 2010 Program Year, Page 43 of 67
In traditional rate designs, a portion of fixed costs are recovered via a volumetric charge or a price per Therm. With this rate structurebecause energy consumption varies while infrastructure costs remain fixed in the short termthe utility is at risk of under-recovering its fixed costs should customers reduce their gas consumption. (In the long-term, it is thought that reductions in usage should eventually result in reduced natural gas supply capacity requirements and thus decreased capital costs, thereby eventually reducing costs for customers.) Also decreased energy usage that results from successful efficiency program implementation can negatively impact the utilitys revenues, furthering the disincentive for utilities to promote efficient energy use. With growing interest in energy conservation and demand side management, policy makers have increasingly approved mechanisms that allow utilities to recover the direct costs and the margin losses associated with implementing energy efficiency programs. Policy makers have also approved financial rewards to shareholders for investments in energy efficiency programs quantifying the value of these demand-side programs and treating them similar to supply side resource investments (e.g., distribution infrastructure, transportation capacity, underground storage, etc.). Respondents identified 39 states that allow utilities to recover the direct costs of natural gas efficiency programs, 30 states that permit recovery of lost margins due to efficiency program implementation, and 15 states that financially reward utilities for well-performing natural gas efficiency programs (see Figure 10). Figure 10
Regulatory Treatment for Gas Efficiency Program Direct Costs, Lost Revenues and Performance Incentives
40 35 30 25 20 15 10 5 0
39
Number of States
30
15
Direct Cost Recovery
Lost Margin Recovery
Perf ormanceBased Incentives Gas Ef f iciency Regulatory Treatment
Recovery of Energy Efficiency Costs

Energy efficiency program costs are divided into two categories: direct costs and margin costs. Direct costs may be recovered in three ways: Through base rates, trackers (e.g., tariff riders, bill surcharges), or deferral accounts. Margin losses (and gains) are adjusted and recovered in one of
two ways: Deferred and recovered via base rates (e.g., revenue decoupling, straight fixed variable rates, and rate stabilization) and/or via margin trackers (e.g., lost revenue adjustment mechanisms or LRAMs). These mechanisms are discussed in more details in the following sections. Figure 11 presents a summary of cost recovery methods. Figure 11
ENERGYEFFICIENCYPROGRAMCOSTRECOVERY
DIRECTCOSTS
MARGINCOSTS
BASERATE
TRACKER
DEFERRALACCOUNT
BASERATE (DEFERRED)
MARGINTRACKER (PERIODICADJUSTMENTS)
TariffRider
BillSurcharge
RevenueDecoupling Mechanism
StraightFixed VariableRates
RevenueStabilization Mechanisms
LostRevenue Adjustment Mechanisms
Direct Program Cost Recovery

Direct cost recovery allows utilities to pass through efficiency costs to customers in one of three ways: 1) Program costs are treated as expenses that are embedded in base rates (or the charge per Therm) in a general rate case. 2) Efficiency program costs are recovered via a separate tariff rider or a surcharge on customer bills (also known as system benefits charge), and the surcharge amount may be adjusted periodically to correct for over or under-recovery of efficiency costs. 3) Program expenditures accrue and are tracked in a balancing account for amortization and later recovery from customers over a period of time.
According to survey respondents, special tariffs or efficiency riders are currently the most common method for recovering program costs. Fifty-seven companies in 27 states use a special efficiency or conservation tariff rider, 33 utilities in 20 states embed natural gas efficiency program costs in base rates, and 21 companies in eleven states apply a mandated system benefits (or public goods) surcharge to customer bills (see Figure 12). Eight other companies in seven states use other methods to recover program costs (e.g., an approved tariff accrual and amortization balancing account, gains from an asset management agreement program).
Figure 12
Regulator-Approved Gas Efficiency Direct Program Cost Recovery Mechanisms

106 Programs in the United States
60
50
Reporting Utilities
40
57
30
in27states
33
20
in20states
21
in11states
10
8
in7states
0 Special Tariff or Rider Base Rate Recovery System Benefits Charge Other Methods Gas Efficiency Regulatory Treatment
Lost Margin Recovery

Recovery of margin losses and revenue shortfalls due to efficiency program implementation are increasingly allowed in more states, thereby removing the disincentive to invest in natural gas efficiency programs due to falling revenues. Sixty-two programs operate in the 30 states identified earlier as having authorized a mechanism for recovering lost margins correlating to efficiency implementation. Additionally, decisions on lost margin recovery are pending for five other utilities in five states. On the other hand, 32 respondents reported that they are not allowed to recover the revenue losses resulting from implementing efficiency programs. Methods for recovering efficiency-related lost margins vary. Non-volumetric rate structures form one method of recovering lost margins. With such rate designs, utilities may collect revenues from customers independent of Therm usage. Here margin recovery is not applied on a per Therm basis but approximates a per-customer basis. These mechanisms include revenue decoupling, straight fixed variable (or SFV) rates, and rate stabilized mechanisms.
Lost revenue adjustment mechanism or LRAM is the other method of recovering lost margins. It requires the utility to identify unrecovered margins associated with efficiency programming, track them over a time period, and recover them after the fact. In this case revenues continue to be recovered on a Therm usage basis; however, rates are adjusted to correct for under- or overrecovery of margins. This type of margin true up is also generically referred to as conservation adjustment mechanism. As shown in figure 13, of the sixty-one utilities that are allowed to recover lost margins in the U.S., thirty-six utilities (in 21 states) have a non-volumetric rate design, twenty (in 13 states) use a lost revenue adjustment mechanism (LRAM), four (in three states) have both non-volumetric rates and a margin tracker, and one uses another method to recover lost margins. Of the 24 utilities that have a LRAM or margin tracker, four indicated that their margin adjustments are capped or limited to a certain percentage of revenues: The cap was placed at two percent of revenues for one responding company. (The 24 utilities include the four listed as having both margin tracker and non-volumetric rates.)
Figure 13
Approved Mechanisms for Recovering Lost Margins

(61 Utilities in 30 States)
Both NonVolumetric Rates and LRAM (4)
Other (1)
2% 7%
33%
Lost Revenue Adjustment Mechanism (20)
Non-Volumetric Rate Design (36)
59%
Gas Efficiency Regulatory Treatment
Revenue decoupling mechanisms have different names, such as conservation enabling tariff, conservation incentive program, conservation margin tracker, conservation rider, and so on. Decoupling breaks the link between utility revenues or profits and gas throughput (or delivered volumes). It may be applied to total revenues or on a revenue-per-customer basis. When the recovered revenue varies from the allowed recovery amount, it is trued up via periodic rate adjustments to adjust the under or over-recovery. Revenue variances specific to efficiency may be tracked in a separate balancing or adjustment account and applied to the next rate adjustment. Decoupling takes on different forms: 1) full revenue decoupling, 2) partial revenue decoupling where only a portion of losses are recovered, and 3) revenue decoupling with certain restrictions (see below).
In some cases, the margin shortfall or surplus, specific to efficiency investments, is allowed to accrue in a deferral account, treated as a regulatory asset, and the recovery is amortized over a period of time, normally applied to the class of customers benefiting from efficiency savings. Sometimes utilities may charge an annual interest rate on the unamortized balances, thus recovering the carrying cost on the deferred margins. Partial revenue decoupling limits margin recovery to a specific percentage of revenues or must be equal to the achieved natural gas cost saving. Revenue decoupling with restrictions may involve caps on the authorized ROE or other limits on regulated earnings. A revenue stabilization mechanism (also known as rate stabilization) is another form of nonvolumetric rates, where utility revenues are de-linked from the amount of gas throughput. Rate stabilization combines lost margin recovery and recovery of operating costs within one mechanism. Here rates are adjusted periodically to adjust for variances in returns from the regulator-authorized return on equity (ROE) and for utility cost variances since the last rate adjustment. With straight fixed variable rates, there are no revenue impacts resulting from efficiency programming, because most or all fixed costs are recovered via a non-volumetric charge. The percustomer charge remains stable regardless of consumption variances (approximating a flat monthly fee). Of the forty utilities in the thirty states that have non-volumetric rate design, 18 (in 13 states) have full revenue decoupling, three (in three states) have partial revenue decoupling, nine (in seven states) have revenue decoupling with restrictions, seven (in four states) have a non-specified type of revenue decoupling, two (in two states) have a straight fixed variable (SFV) rate design, and one has a rate stabilization mechanism. (The 40 utilities include the four that have both non-volumetric rates and margin trackers.) Revenue recovery in the form of a decoupling mechanism is pending for four utilities in three states.
Table28
NONVOLUMETRICRATESTRUCTURES
40NATURALGASUTILITIESIN30STATES1 MECHANISM FullRevenueDecoupling PartialRevenueDecoupling RevenueDecouplingwithRestrictions NonSpecifiedRevenueDecoupling StraightFixedVariable RateStabilizationMechanism
1
NUMBEROFCOMPANIES 18 3 9 7 2 1
NUMBEROFSTATES2
13 3 7 4 2 1
The forty natural gas utilities include four that have both revenue decoupling and a margin tracker (or lost revenue adjustment mechanism). The same state may be represented in more than one category of non-volumetric mechanism
As seen in Figure 14, in 2010 natural gas efficiency programs are found in all states that allow the utility to segregate margin recovery from its natural gas throughput or delivered volumes.13
Figure 14
STATESWITHNATURALGASEFFICIENCYPROGRAMSANDREVENUEDECOUPLING2010YEAR
Data Sources: AGA Fact Sheet: Decoupling and Natural Gas Utilities, August 2010, http://www.aga.org/ourissues/RatesRegulatoryIssues/ratesregpolicy/Issues/Decoupling/Documents/2010AugAGADecoupling FactSheet.pdf; 2011 AGA Natural Gas Efficiency Programs Survey
Utility Performance-Based Incentives

As mentioned earlier, recovery of efficiency program costs and associated lost margins removes the utilitys disincentive to promote energy efficiency, thereby making program implementation revenue neutral. To incentivize investor-owned utilities to commit fully to efficiency program improvements and expenditures, regulators have gradually approved more mechanisms that financially reward utilities for making energy efficiency investments. Efficiency performance-based incentives for utilities involve three mechanisms: shared savings, performance targets and rate of return incentives. Shared savings mechanisms reward utilities either for investing in energy efficiency at predetermined minimum spending levels or for making cost-effective efficiency investments. Financial incentives are calculated as a percentage of efficiency spending or as a percentage of the achieved net system benefits (the difference between efficiency costs and energy savings or other
13
For an update on revenue decoupling and other rate designs per states, see Innovative Rates, Non-Volumetric Rates, and Tracking Mechanisms, AGA Presentation Slide Deck (July 2011), http://www.aga.org/ourissues/RatesRegulatoryIssues/ratesregpolicy/Pages/febr2011-innovative-ratesNon-volumetric-ratesandtrackingmechanisms.aspx Natural Gas Efficiency Programs Report 2010 Program Year, Page 49 of 67
economic benefits). Awards are often capped at a specified dollar amount regardless of the rate applied to spending levels or net benefits. Commonly investors and ratepayers share the savings. In some cases, penalties are applied when programs fail to meet the minimum threshold. Performance targets are often conditions for capturing earnings on efficiency investments. The pre-determined goals may be set at certain investment levels, total energy savings, the extent of cost-effective savings, or the numbers of units installed. Financial awards may be tiered according to performance thresholds: for example, for attaining at least a proportion of goals, meeting the target, or exceeding them. Also penalties may apply if the utility falls short of the minimum requirements. Also incentives may be capped, even if performance surpasses the maximum threshold and may involve a dead band, where incentives are suspended within this performance range. Rate of return incentives allow earnings on natural gas efficiency expenditures either equal to the utilitys authorized return on equity (ROE) or at an enhanced levelan added or bonus ROE applied to efficiency investments. Incentive structures may involve a combination of these three mechanisms, making performance targets a prerequisite to shared savings or returns on efficiency investments. Thirty-eight natural gas efficiency programs are implemented in the 15 states identified earlier as having utility performance based incentives. When asked to identify all mechanisms that formed their incentives, they indicated having one of the following mechanisms: 14 companies (in seven states) have a shared saving mechanism, six (in three states) have a rate of return (ROR) mechanism, and 18 companies (in four states) have performance targets. Many have more than one incentive mechanism. Table 28 shows the various arrangements as reported by companies.
Table28
UTILITYFINANCIALINCENTIVESTRUCTURESSPECIFICTO NATURALGASEFFICIENCYPROGRAMIMPLEMENTATIONANDPERFORMANCE
FINANCIALINCENTIVEMECHANISMS SharedSavings SharedSavingsandPerformanceTargets SharedSavingsandOtherMechanisms RateofReturnIncentive RateofReturnIncentiveandPerformanceTargets PerformanceTargetandOtherIncentives
1
PROGRAMS 8 5 1 3 3 18
STATES1 3 4 1 2 2 9
The same state may be represented in more than one incentive category
According to twelve survey companies, they are eligible to share between -12 percent and 33 percent of ratepayer savings (the median share was 15 percent). Of the six companies that have a rate of return incentive, five earn an ROR on natural gas efficiency investments equal to its authorized return on equity (ROE), and one earns a rate greater than the authorized ROE.
Low Income Program Requirements

Specific to the low income customer segment, 75 of 108 respondents (in 29 states) indicated that they are mandated (via ruling or legislation) to fund natural gas efficiency programs for this customer segment. In all 29 states (74 of the 75 programs), the program administrator is required to use one or more regulator-picked cost-benefit tests to measure program performance. This calculation must be based on net savings for 55 percent of programs (44 of 81), on gross savings for 38 percent (or 31 programs), and on both net and gross for two percent (or two programs). While nearly all these low income programs are required to calculate cost effectiveness, only 41 of 75 (in 24 states) are required to pass these mandatory tests in order to qualify for program cost recovery. Thus more than 45 percent of programs are able to recover low income program costs, regardless of their cost effectiveness statusperhaps because there is an acknowledgment in such cases of the wider societal benefits and a recognition that low income programs tend to be less cost-effective than mainstream efficiency programs.
Fuel Switching Allowances

Sixteen percent of U.S. respondents (17 of 107) reported that their regulator-approved natural gas efficiency program encourages fuel switching through financial incentives (e.g., rebates, loans and other benefits) to customers who install natural gas equipment in new homes, convert to natural gas from other fuels, or replace old equipment with new higher-efficiency natural gas equipment.
Green House Gas or Carbon Emissions Targets and Credits

If their utility operated within a state that targets greenhouse gas (GHG) or carbon emissions as an explicit and measureable reduction goal, respondents were asked whether their programs earned credit via a regulator-approved mechanism. These programs include renewable energy certificate purchase programs and carbon offset purchase programs that support wind farms and biogas generating plants. Four programs (in three states) indicated that the utility was able to recover program costs, two (in one state) earn a rate of return on their program investment, and one program in a fifth state has both regulator-approved cost recovery and return on investment. Similar programs are pending in two other states. When asked whether they had sought regulatory approval for cost recovery or earnings on project investments where GHG emissions reduction is the primary goal, five of 91 respondents (in five states) indicated that they had secured regulatory approval, and two (in two states) were unsuccessful. Eleven companies (in eight states) are exploring such options.
V. THOUGHTS AND COMMENTS

Program administrators were asked to share their experiences with implementing natural gas efficiency programs. The following is an anecdotal account based on respondent observations regarding lessons learned, program delivery barriers, market penetration, and the most successful and innovative program features.
Delivery Barriers and Lessons Learned

The persistent economic downturn and slow recovery continued to pose a challenge for many natural gas efficiency programs in 2010, particularly in the hardest hit areas, thus slowing momentum in program delivery and market penetration. Shrinking resources again prevented customers from taking advantage of appliance rebates and other financial incentives for improving energy efficiency. Particularly in rural areas, it was difficult to attain robust participation levels in residential programs as was the case in other areas with low housing stocks. Some business prescriptive programs were very slow as well, perhaps because many businesses once more elected to extend the life of their existing equipment, or opting to lease equipment, rather than invest in higher efficiency systems. While some rebate programs got off to a slow start and ramped up after a push from advertising, a number of programs were faced with unexpected high popularity of their efficient appliance rebates and other incentive programs. Federal tax credits were cited as positively impacting customer participation. In some newer programs, customer acceptance started stronger than initially anticipated. While at first glance, strong interest appears to be a positive outcome, it can be problematic if program implementers are caught off-guard. With equipment rebate programs being driven by the market, it is often challenging for program managers to forecast participation and to manage program budgets so as to maintain steady program offerings throughout the year. Regardless, it is important to begin imparting information about available funding at the beginning of each program year and to make certain that customers have access to this information at all times. It is also important to leave room under budget caps for unforeseen expenditures in a launch year. Respondents suggested that customers are interested in being green if there are incentives to assist them in paying for upgrades. In many markets, residential customers responded favorably to subsidized, low-cost diagnostic or computer energy audits in conjunction with specific efficiency rebates such as attic and wall insulation and air sealing. One national market research survey suggests that such measures are in demand. However, the in-home energy audit as pre-requisite to qualifying for rebates was counter-productive to garnering customer interest and rather created skepticism toward the program and suspicion among some customers. Many expressed a concern regarding program costs and the difficulty of achieving cost effectiveness, particularly for companies with a small customer base. This concern is expected to continue if natural gas costs continue to settle, which might lower the cost effectiveness threshold and possibly limit the types of measures that are deemed cost effective in the near future. Some are taking a proactive approach by attempting to streamline program costs and opting to consolidate program delivery with a single vendor. Another difficulty in program implementation and evaluation has to do with separating savings specific to heating equipment replacements from those linked to other retrofit measures. Others were faced with the unintended consequences of changing their product brand. One program rebranded its efficiency product to comply with a wider effort and began delivering under a new program name. The lack of name recognition caused much confusion and lost interest, which required much direct marketing to regain customers attention.
Another unforeseen effect comes from multiple entities offering overlapping incentives within the same service territory, such as the federal government and neighboring utilities, which can also cause misunderstanding. Clear communications and a simplified application process can offset such complications to the benefit of customers. Care must also be taken when reaching out to customers in order to avoid an uninformed consumer response. In one case, an ill-informed blogger suggested that the utilitys efficiency incentive program was a scam. As a result the program administrators invested considerable effort to re-educate consumers and neutralize the negative effect on customer perceptions. Also this program now works more closely with local municipalities before launching a new program in a target area. Other market hurdles have to do with the lack of new energy efficient gas technologies which limit new program opportunities. Another issue is the low stock of high efficiency gas appliances in many markets white goods and box stores and the practice of relegating such high efficiency appliances to special order status. Managing vendors in a market transformation environment is yet another challenge. Program administrators find themselves trying to balance between vendors rising expectations regarding program funding and adherence to approved budget guidelines. And then there is the shortage of auditors and contractors in many areas that qualify for efficiency installations. Having a strong alliance with trade partners goes a long way toward clearing such market hurdles. Trade allies (such as HVAC contractors, energy auditors, plumbers, and equipment dealers and retailers) are vital to the successful implementation of efficiency programs. Sustained contact with these business partners not only improves program marketing but also the likelihood that highefficiency natural gas equipment will be regularly stocked rather than special ordered. Efficiency programs are also contractor-driven, and thus it is crucial to develop networks of trained local contractors that are incentivized and aware of program offerings and have the expertise to complete quality installations. Quality technical training is essential to optimizing efficiency installations and promulgating safety standards. Good relationships with vendors allow program administrators to monitor their advertising practices and safeguard the accuracy of their messaging, thereby ensuring that they positively represent the utility. Other respondents expressed the need for better marketing and outreach and to explore incentives for commercial or institutional customers. They have also suggested that where traditional marketing techniques are less successful in certain jurisdictions, community-based approaches have achieved good results. Based on lessons learned, here are other best practice trips shared by respondents: Customers rely on their utility to provide unbiased solutions and advise to meet their energy needs. They demand energy-based, rather than fuel-based, efficiency solutions. Through this strategy customer needs are met, results optimized, and program efficiencies realized. Aim for simplicity in program design: simple but meaningful. Steer away from programs that may be perceived as competitive in nature. Establish program assumptions and budgets prior to implementation, thus creating a stable operating environment for the utility and certainty of program availability in the market. Ensure that programs are developed to meet the needs of all customer classes. The utility has a direct relationship with their customers and knows the market in which it operates. Program implementers should have the flexibility to be responsive to customer needs and promptly adapt to market changesthat is, they should be able to alter program
features within the program implementation year by for example adding new programs or technology offerings. For example, energy efficiency landscape was transformed with the influx of ARRA funds and will continue to change as funds are depleted. As measures are added to a program, cross reference to other programs to ensure consistency and ascertain that program rules are enforceable and measurable (e.g., preand post blower door testing for residential programs. Engage business partners at the very onset of program implementation. Develop relationships with trade allies and make the most of their capabilities. The following steps can help achieve this: maintain a close working relationship with trade allies (e.g., warm calling after mailers can be very effective) collaborate with contractors and vendors to deliver your message to a wider audience meet regularly with contractors offer in-house training and other resources that support them in selling your program Develop partnerships with all stakeholders. Utility collaborations can be very effective in streamlining implementation and lowering costs. Also maintain frequent contact with regulatory energy program staff, trade allies and customers. Marketing, advertising and outreach are critical for the program to gain momentum. The need for strategic messaging is very important. Customize and target messaging to suit the diverse markets in which the utility operates, but keep it as simple as possible. The need for proper promotion of incentive offerings is even more critical in an environment where other utility funded programs overlap the programs service territory. Enhance program offerings for limited income customers. Higher incentives are required to enable them to install measures. Also set the poverty level requirement based on your particular low income customer base and make sure that funding levels are adequate per qualified customer. Leverage other funding and the expertise of community action agencies.
Market Penetration
Respondents were asked to assess the degree by which customers recognized and took advantage of their ratepayer funded natural gas efficiency programs. They were asked to estimate market penetration as the proportion of program participants to the potential market. The numerator in this ratio may represent the number of customer enrollments, processed rebates or online tool sign-ups and the denominator may represent the number of eligible customers or general service or firm gas customer base. Some respondents were uncertain regarding program adoption, either because programs were either too new or because data were not available. Forty programs provided either quantitative or qualitative answers, indicating that market saturation varied by program age, customer segment and program type. Based on 30 of 42 responses to this question, the median market penetration for natural gas efficiency programs was 2.5 percent. Saturation rates ranged from 0.1 percent to 48 percent.
Ten programs had a market share of less than one percent, twelve had from one to less than five percent, four achieved five to less than 10 percent, two reached ten to less than 15 percent, and two captured at least 25 percent of the potential market (see Table 29). The lower penetration rates generally correlated with newer programs.
Table 29
EFFICIENCYPROGRAMMARKETPENETRATION
30PROGRAMS MARKETPENETRATION
Lessthan1% 1%<5% 5%<10% 10%<15% 15%<20% 20%<25% 25%andgreater
PROGRAMS
10 12 4 2 0 0 2
PERCENTAGE
33% 40% 13% 7% 0% 0% 7%
Some programs were constrained by the annual funding caps and one-year implementation cycles in achieving long-term strategic market growth. Others indicated that they were becoming increasingly inhibited by the proliferation of electric heat pumps and limitations in promoting conservation only to dwellings where the primary heating source is natural gas. However, these programs are exploring innovative conservation technologies such as natural gas heat pumps which may improve delivery of Therm savings to customers.
Most Successful Attributes

When asked about their most successful program attributes, respondents focused on specific implementation approaches, individual program components and program results. Here is a listing of the most successful attributes of surveyed programs, beginning with the most cited aspects: Partnerships with Other Stakeholders: Strong trade alliances are fostered in many programs through outreach, education, incentives, training, and shared goals. Many find that contractors, when educated about natural gas efficiency and its benefits to their businesses, are the most effective resource to inform and persuade customers to take advantage of rebates and other financial incentives. As mentioned earlier in this report, many programs benefit from joining forces with other utilities in adjacent or overlapping service territories, in many instances combining or matching natural gas, electric and water saving measures, thereby reducing administrative costs, improving process efficiency, and benefiting customers through more comprehensive program offerings and enhanced financial incentives. Also successful are multi-utility collaboratives, such as the GasNetworks partnership, which offers nationally-recognized, comprehensive and consistent market transformation programs to customers throughout Massachusetts, New Hampshire and Rhode Island.
Involvement in community-level grassroots conservation efforts has also been productive particularly coalitions with community action agencies that deliver home heating assistance and weatherization services to low-income households. Such ties help to leverage utility low-income energy efficiency program dollars with federal low-income heating assistance program (LIHEAP) funds, Department of Energy weatherization assistance funds, and utility customer assistance program funds. This presents a win-win for customer and utility, as it helps minimize utility bill payment arrears and write-offs and thus reduces the utilitys uncollectible expenses. Low-Income Usage Programs: As just mentioned, low-income weatherization programs provide many economic and societal benefits, including customer comfort, safety, and cost savings for both the utility and its customer base. For many programs, the low-income weatherization component is the most successful in achieving high energy savings and cost-effectiveness. Another way of coordinating among programs is when higher usage customers are identified via the customer assistance program and those most in need are provided with furnace repairs or replacements. Commercial and Residential Rebates and Incentives: Without direct rebates and other financial incentives, such as efficiency project subsidies and efficiency financing, many customers would be reluctant to move forward with efficiency improvements, particularly in the lingering economic climate. Many programs reported a steady growth in residential high-efficiency equipment rebate programs. In some cases, enrollments doubled in 2010 from prior year (e.g., Energy Star Home programs). In other newly launched programs, the level of interest in the residential HVAC replacement program was not well-anticipated by program administrators, and some programs even exceeded their targets. Residential and Commercial Audits and Customized Retrofits of Large Facilities: Home and business energy audits provide an educational opportunity for customers to learn about energy efficiency, improved natural gas efficiency measures, and cost savings through lower bills. Many programs offer free or low cost energy audits to encourage a whole house approach to energy efficiency. Audit information gives business customers, for example, the opportunity to create an energy plan that incorporates recommendations from the technical assessment and seek approval for initiating energy efficiency improvements. Some credit small business outreach programs for improving market penetration. Other Success Factors: The obvious success metric is meeting or exceeding state-mandated program savings goals, which happily many respondents reported. Elements that are important to the outcome of natural gas efficiency programs include expedited program startup and a renewed ability to market the natural gas advantage, through multi-media marketing, such as web-based applications, brochures and TV and radio advertising. Also vital to the success of a program is clear regulator support as evidenced through approved program cost recovery, lost revenue recovery, and possible performance bonuses for meeting or exceeding program goals. The following success elements and metrics were also mentioned: Comprehensive portfolios accessible to all segments in the customer baseoffering something for everyone and an ability to cover 90 to 100 percent of natural gas end uses. A significant focus on community education and outreach is necessary for driving program participation and general conservation awareness among customers. This involves reaching customers through environmental organizations, local community groups, stakeholder and partner organizations, and even schools. A strong focus on face-to-face interactions with customers is also important to program success. Testing different approaches to increasing awareness and building support for efficiency.
Ability to conduct outreach via multi-media platforms, including of web based tools, and and ability to leverage trade allies within service franchise. A positive perception among customers and regulators of efficiency programs, and ensuring that vendors relay accurate information and fact-based advertising. Ensuring customer satisfaction with the programs, and forming customer-utility partnerships to promote energy efficiency. Customer recognition (particularly in commercial and industrial programs) that the utility is there to help their business save resources during this protracted economic recession. Strong participation in rebate programs for efficiency measures, as reported by many, particularly in: High-efficiency space heating (having an excellent total resource cost performance) Offering enhanced HVAC rebates Residential 95% AFUE condensing furnace rebate program was by far the most successful measure in one portfolio Attic insulation
Growth in program recognition, identifying customer response 'triggers' and making them available for program delivery in 2011 Ability to show energy savings to the customers bill and depict years to payback. Streamlined and simple process for participants and trade allies: Ease of program implementation, customer-friendly programs, a simple rebate process, and quick turnaround of customer reimbursements by the utility. Examples of this include: high-quality, third-party multi utility-sponsored incentive processing program (e.g., EFI rebate processing) funding of programs that are run by the regulator or community action agencies who are well-equipped in reaching low income customers Refunding community action agencies (CAAs) based on total job cost rather than on a perinstalled measure basis Integration with electric programs, reduced administrative costs, and improved joint customer satisfaction Robust alliances with trade partners and program management contractors, helping the utility to better coordinate program components and optimize results. Also rewarding are well-developed trade ally networks that can be leveraged across fuels and funding sources. Active involvement by HVAC contractors in utilitys service territory. Hiring, training and employing in-house Building Performance Institute (BPI) certified home energy auditors Low administrative costs coupled with high energy and cost savings Prioritizing highest consumption savings measures Calculating energy savings using deemed savings Overall commitment to program growth and adaptability Leveraging of statewide efficiency programs with complementary products and enhanced incentives.
Successful Programs and Products: Specific products and program activities were mentioned as most successful. These include: Low income program continues to generate high savings by significantly lowering consumption within this traditionally high energy-usage customer segment. Positive attributes of these programs include: measures of success include the increased safety and comfort of residents weatherization is delivered by community action and other state agencies, lowering program implementation costs and increasing participation averaging a 24 percent in natural gas consumption per residence (reported in one case) Programs that assist moderate income residential customers that are not eligible for free weatherization Strong residential new construction program reported as key to the overall performance of the efficiency programs. Residential retrofit and equipment replacement program cash incentives coupled with low interest financing. Air sealing programs for multi-family market (2 to 8 units) Residential consumer products and Energy Star Home programs (reported to have doubled in 2010 due to an upturn in the local economy). Home and small business energy audits, providing an opportunity for customers to learn about energy efficiency and how improved gas measures can save energy and lower bills. For example, Home Performance Solutions energy audits were reported by one program to have exceeded the three-year program goal in year 2 of program implementation due to accelerated ramp up. Cost-effectiveness of multi-family direct install program Solid demand for business custom programs Financial enablers are in place to continue to motivate and drive excellence in DSM performance.
Most Innovative Features

Respondents were asked to share the most innovative features of their natural gas efficiency program. Many of the most successful attributes discussed above were highlighted as most innovative. These include strategic partnerships, a whole home or project approach to efficiency, targeted marketing and education campaigns, and new technologies. Specific program components were also featured in the comments submitted for 41 efficiency programs. Of course, what is innovative in one program might be a regular feature in other more mature programs. Strategic Partnerships Various collaborations were touted as both innovative and successful, including those between two neighboring utilities (e.g., gas, electric or water), multi-utility collaboratives, partnering with business on strategic program design and delivery, leveraging funds, and jointly promoting energy efficiency green products with non-energy institutions. For example, Four natural gas utilities joined forces to build a comprehensive energy efficiency program that benefits all their customers. This achieves considerable dollar savings relative to
developing separate programs, which can be passed along to customers through enhanced financial incentives. The GasNetworks collaborative is another example of several utilities across three states. Joint programs with electric utilities within the same service territory, reported by several as reducing costs and providing multi-fuel efficiency offerings. Integrating with electric efficiency programs provides a one-stop shop for customers. In one case, a joint high efficiency natural gas furnace with electronically commutated motor (or ECM) program, the customer receives a rebate of $400 for the installation of an electrically efficient natural gas furnace, where the rebate funding is split between the gas utility and the electric utility.
Energy Assessments and a Whole House or Project Approach to Efficiency Home audits, particularly when coupled with a comprehensive view of efficiency, yield very favorable results. Several programs reported a whole project or system approach to efficiency and a thorough costeffectiveness assessment of proposed measures. Some programs require a home energy audit to identify energy savings opportunities in the home or building shell. Others maintain contact with customers after diagnostics to encourage them to proceed with recommended seal-ups and connect them with BPI-accredited contractors qualified to carry out Tier III seal-ups. Other programs condition substantial furnace and other equipment rebates on completing free energy audits, again with the goal of shifting customers to a whole house approach. Other programs provide larger incentives to higher use residential customers to help them achieve the type of savings traditionally seen in low-income customer weatherization programs. Still others subsidize a portion of the recommended measures, including insulation and air duct sealing. Targeted Marketing and Education Many program administrators find conservation education, outreach and targeted marketing to be the most cost-effective tools in achieving energy savings. Some programs have comprehensive school education programs. Others target customers directly via natural gas usage letters that teach conservation and ways to lower energy bills, energy analyzer tools, and complimentary energy conservation kits, often customized for specific markets. Some disseminate energy efficiency information through the local media, and others target trade allies with dealer spiffs incenting them to promote natural gas efficient appliances. Here are a few other examples of innovative and successful means for pro-conservation messaging: Fun and effective elementary school education program, reaching 5,000 fifth graders and achieving significant Therm savings (indirect outreach to parents). Other education programs, directed at sixth graders, were reported as very successful. EnergySMART Activity and Essay contest throughout the service territory, educating third graders about the importance of energy conservation and efficiency. This initiative focused on changing household behavior through children and encouraging parental support for such activities. As part of a School Direct Outreach program, an interactive Energy Education Mobile, travels to schools across a Canadian province, educating students and the public about the provinces energy landscape and the benefits of energy efficiency in the home. Customer Take Control of Your Natural Gas Bill dashboard. This program offers an on-line resource that allows customers to determine the reasons behind higher or lowered natural gas bills. On some sites, customers are able to easily navigate to statewide efficiency program sites where more efficiency education is available. Neighborhood Energy Savings Outreach Program used a targeted approach and hastened program ramp up.
New Technologies and Alternative Measures Many program administrators identified new natural gas efficiency technologies as key to growing their programs. A few have been able to incorporate research and development of new and alternative technologies into their energy efficiency programs. A few others are allowed to pilot new technologies within their space and water heating programs, which if successful, will enable them to transfer many custom or innovative features over to mainstream programs (e.g., tankless water heaters). While not necessarily emerging technologies, a few alternative programs were cited: Adding smart low-flow showerheads to program measures. Showerhead has a low flow rate and thermal actuated valve to slow hot water flow to a trickle until the bypass valve is pulled, thus reducing wasted hot water and thus saving both natural gas and water. Pre-rinse spray valve direct install program for small commercial customers, providing them with energy savings and enabling the program implementer to survey their natural gas appliances while on site. Tiered rebates for residential and commercial customers, promoting the adoption of higher efficiency in natural gas appliances.
Other Innovative Features Programs also featured the following components as beneficial: A Green Saver Tariff, whereby customers receive a $2 credit on gas bills for 24 months, if they participate in the Home Performance with Energy Star program and either 1) install all recommended efficiency retrofits, or 2) purchase/build a green home with a minimum 3-star rating that houses at least three gas appliances. Involvement of local HVAC contractors in program delivery. For instance, through continuous outreach to contractors through in-person contacts, newsletters and seminars, one program was able to engage over a thousand contractors and trade partners in promoting rebate programs, which led to a significant jump in customer participation. Another example is Comfort System Analysis training program for HVAC contractors. Brand building and customer engagement through increased face-to-face consultation and program delivery with the purpose of increasing the likelihood of returning clients. Funding gauges added to program website to allow customers to keep track of remaining available funds. Transition of residential HVAC program to online application processing and electronic verification of data eligibility. Move toward instant application processing in residential programs at the point of purchase or contact with a trade ally. Customer account managers proactively working with C & I customers on new energy efficient improvements (e.g., HVAC, appliances and shell measures). In many newer large customer programs, a hold-your-hand approach is adopted throughout the process, resulting in more completed projects with larger savings, benefiting customer and utility. Some programs use a Shared Savings program to fund energy efficiency improvements for commercial and industrial customers. Fuel conversion from propane to natural gas: while the regulator in this example typically does not support fuel switching, they approved this program for low income propane customers. Requirement to accept Home Performance with Energy Star audit to access incremental rebate and have BPI certified auditors in-house (on staff) to perform. Although the home assessment posed a hurdle for some customers, once completed, it provided customers
with essential information on their homes efficiency and on available options for improving efficiency levels. Subsidizing a portion of the recommended efficiency installations that were adopted through the home audit programs, including insulation and air duct sealing. Energy savings calculated off a customers utility rate Use of an annual balancing adjustment to true up program Internally developed cost-effectiveness model, and customized performance-tracking systems. Rebates specific to moderate income customers that do not meet the poverty threshold to qualify for more traditional low- and no-cost weatherization and efficiency programs. As a part of the efficiency program, funds are available to replace customer-owned gas yard lines. A comprehensive portfolio and an ample selection of high efficiency appliances
APPENDIX A STATE ENERGY EFFICIENCY PROGRAM PROVISIONS AND PRACTICES

STATE AL Active EE Program(s) EE Market Potential Studies Utility Funding Requirement Low-Income EE Requirement Program Cost Recovery Lost Margin Recovery PerformanceBased Incentives Fuel Switching Full Cycle EE Measurement EM&V Reporting Requirement
AK
AR AZ CA CO CT
DC DE
FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND
NE
NH NJ NM NV NY OH
OK
OR PA RI SC SD TN TX UT VA VT WA WI
WV
WY Canada
States
40
21
28
29
39
30
15
11
39
In place as of 2010
Pending regulatory approval as of 2010 Natural Gas Efficiency Programs Report 2010 Program Year, Page 62 of 67
APPENDIX B NATURAL GAS EFFICIENCY PROGRAM 2010 EXPENDITURES AND 2011 BUDGETS BY STATE
STATE
ALABAMA ALASKA ARIZONA ARKANSAS CALIFORNIA COLORADO CONNECTICUT DELAWARE D.C. FLORIDA GEORGIA IDAHO ILLINOIS INDIANA IOWA KANSAS KENTUCKY LOUSIANA MAINE MARYLAND
MASSACHUSETTS
A. RESIDENTIAL
Expenditures
B. LOW INCOME
Expenditures
C. COMMERCIAL
Expenditures
D. INDUSTRIAL
Expenditures
E. OTHER
Expenditures
F. EM&V
Expenditures
PROGRAMS TOTAL
Expenditures
2010
Budget $0 $0 $1,650,000 $3,770,524 $6,924,710 $6,078,600 $0 $0 $0 $797,894 $8,033,246 $0 $1,358,291 $0 $25,958 $4,900,000
2011
2010
Budget $0 $0 $650,000 $71,986 $4,929,580 $2,781,606 $0 $0 $0 $0 $291,423 $4,914,153 $1,333,919 $5,296,626 $0 $727,883 $0 $98,325 $1,290,000
2011
2010
Budget $0 $0 $2,476,000 $2,795,953 $3,333,519 $6,400,000 $0 $0 $703,974 $0 $860,052 $1,642,305 $8,664,975 $0 $0 $0 $551,625 $0
2011
2010
Budget $0 $0 $0 $441,596 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,110,491 $0 $0 $0 $0 $0 $0 $0 $0 $2,736,844 $0 $0 $0 $0 $2,431,331 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
2011
2010
Budget $0 $0 $0 $247,991
2011
2010
Budget $0 $0 $0 $114,879 $4,576,333 $853,518 $650,000 $0 $0 $150,000 $0 $59,590 $687,808 $543,523 $540,000 $0 $10,000 $0 $0 $0 $4,436,517 $2,747,294 $26,000 $0 $220,000 $0 $0 $0 $124,540 $1,181,564 $125,760 $5,574,014 $80,000 $0 $794,000 $0 $717,844 $50,000 $199,000 $15,000 $0 $0 $0 $0 $100,000 $15,909 $1,597,125 $0 $318,578 $29,400
2011
2010
Budget $0 $0 $4,776,000 $7,442,929
2011
$0 $0 $1,216,877 $1,514,088 $9,759,415 $5,013,647 $0 $0 $0 $1,057,334 $6,748,556 $0 $487,463 $0 $546,468 $4,200,000
$0 $0 $487,579 $0 $4,455,510 $2,808,250 $0 $0 $0 $0 $208,361 $1,030,966 $1,373,225 $4,084,735 $0 $425,599 $0 $61,221 $1,978,925
$0 $0 $270,790 $479,380 $1,951,289 $3,417,292 $0 $0 $519,581 $0 $356,726 $1,055,468 $6,983,033 $0 $0 $0 $400,160 $0
$0 $0 $0 $278,540 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4,442,563 $0 $0 $0 $0 $0 $0 $0 $0 $433,913 $0 $0 $0 $0 $1,251,950 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,344,050 $0
$0 $0 $127,847 $191,549
$0 $0 $112,279 $14,447 $370,977 $264,665 $100,647 $0 $0 $0 $0 $50,346 $434,875 $425,974 $405,886 $0 $10,449 $0 $0 $0
$0 $0 $2,215,372 $2,478,004
$43,337,909 $53,670,742 $65,994,133 $68,183,471 $57,120,341 $57,572,151 $10,893,162 $28,639,821 $23,704,859 $55,404,699 $2,784,381 $2,940,487 $387,300 $0 $0 $221,721 $0 $318,052 $875,500 $0 $0 $109,020 $0 $214,868
$201,421,381 $268,047,217 $19,215,260 $18,981,814 $11,727,136 $16,785,706 $0 $0 $0 $1,990,819 $0 $0 $0 $2,223,827
$10,427,564 $12,670,835
$11,168,866 $13,633,829
$18,058,149 $24,490,292 $25,703,553 $24,082,083
$3,741,767 $14,617,466
$2,235,962 $6,925,631 $1,791,559 $1,741,448 $3,215,029 $3,312,775 $0 $5,251 $0 $0 $0 $0 $0 $20,326 $0 $0 $0
$25,501,719 $51,635,350 $11,394,782 $13,294,441 $40,392,236 $41,896,459 $0 $928,762 $0 $1,007,849 $6,178,925 $0 $2,116,500 $0 $675,908 $6,190,000
$38,566,199 $50,693,550 $14,094,916 $23,890,700 $17,740,888 $26,168,135 $15,519,033 $39,158,176 $13,718,725 $14,698,497 $16,363,332 $20,209,675 $0 $3,568,130 $99,200 $15,190 $1,739,634 $2,243,001 $989,056 $1,005,000 $141,286 $0 $1,828,595 $2,425,000 $209,905 $1,009,383 $46,700 $1,113,475 $1,287,588 $2,525,852 $0 $7,307,926 $241,260 $0 $3,452,982 $170,000 $75,000 $2,015,500 $2,791,135 $1,055,968 $1,145,000 $138,000 $830,309 $4,235,008 $0 $1,860,743 $0 $0 $606,478 $713,538 $461,543 $0 $0 $0 $2,349,176 $301,000 $125,212 $0 $0 $929,456 $500,000 $89,000 $352,251 $1,739,865 $0 $1,091,735 $0 $4,255,554 $0 $1,876,500 $0 $0 $470,000 $840,895 $1,378,483 $50,000 $0 $0 $1,887,018 $983,000 $150,000 $0 $0 $1,285,000 $500,000 $99,000 $663,188 $1,855,966 $0 $1,140,000 $0 $5,100,653 $13,309,641 $7,877,464 $14,347,587 $0 $856,676 $0 $4,326 $139,062 $1,496,422 $131,296 $135,000 $0 $750,581 $0 $7,504,556 $34,133 $2,363,000 $0 $135,463 $0 $10,106 $1,457,422 $600,428 $77,000 $8,860,289 $0 $4,831,819 $23,032 $0 $995,476 $0 $0 $1,557,525 $3,498,976 $846,122 $0 $0 $1,413,966 $304,374 $7,758,172 $28,000 $2,852,000 $0 $174,187 $0 $52,150 $1,751,769 $719,647 $312,000 $9,463,537 $0 $2,452,393 $347,686
$0 $1,210,066 $31,641 $0 $0 $0 $210 $21,189 $43,433 $92,106 $106,676 $704,968 $105,000 $0 $265,000 $0 $477,730 $46,011 $174 $120 $25,570 $0 $0 $0 $0 $13,569 $0 $826,203 $0
$71,612,069 $105,188,902 $41,090,454 $77,866,469 $36,383,139 $45,513,201 $0 $6,745,930 $99,200 $19,726 $2,508,656 $4,496,394 $1,688,571 $1,275,000 $141,286 $0 $0 $7,059,228 $170,000 $75,000 $4,093,025 $7,255,546 $3,406,333 $1,275,000 $138,000 $1,134,683
MICHIGAN MINNESOTA MISSISSIPPI MISSOURI MONTANA NEBRASKA NEVADA

NEW HAMPSHIRE
$4,612,211 $7,952,861 $2,139,832 $3,433,131 $4,563,894 $0 $460,381 $0 $0 $2,293 $0 $0 $30,000 $0 $369,750 $0 $0 $1,297 $0 $9,809 $0 $0 $0 $0 $334,000 $0 $7,584,282 $63,310 $0 $514,270 $0 $0 $50,000 $0 $0 $0 $0 $403,984 $0 $0 $861,990 $0 $50,000 $0 $0 $0 $0 $809,120 $0 $980,000 $76,168
NEW JERSEY NEW MEXICO NEW YORK

NORTH CAROLINA
$67,362,190 $87,800,285 $19,140,085 $18,805,878 $37,838,227 $61,961,683 $22,567,958 $58,093,943 $5,187,007 $21,079,604 $6,159,941 $26,800,553
$1,349,770 $16,819,183 $4,259,730 $5,133,555
$125,782,378 $186,568,593 $39,313,516 $119,418,514
NORTH DAKOTA OHIO OKLAHOMA OREGON PENNSYLVANIA RHODE ISLAND

SOUTH CAROLINA
$11,654,115 $21,263,682 $18,927,694 $18,700,000 $11,347,158 $15,000,128 $2,335,000 $135,000 $1,088,097 $109,200 $1,389,900 $1,204,268 $4,438,994 $0 $3,789,281 $479,330
$31,967,140 $42,575,632 $22,930,570 $27,794,493 $12,962,357 $21,640,043 $5,089,174 $345,046 $1,170,416 $46,700 $2,053,037 $1,977,016 $3,302,672 $0 $23,986,015 $327,602 $6,369,000 $350,000 $1,262,284 $109,200 $2,727,050 $2,122,915 $6,239,211 $0 $8,680,252 $932,584
$3,258,000 $11,052,321 $17,442,053
SOUTH DAKOTA TENNESSEE TEXAS UTAH VERMONT VIRGINIA WASHINGTON WEST VIRGINIA WISCONSIN WYOMING
$32,565,537 $28,236,903
$1,163,307 $1,752,124
$35,686,266 $32,240,796
$17,139,312 $12,640,946
$540,519 $4,092,693 $1,081,751
$29,361,736 $29,650,267
APPENDIX C NATURAL GAS EFFICIENCY PROGRAM 2010 EXPENDITURES AND 2011 BUDGETS BY REGION
A. RESIDENTIAL REGION 2010 Expenditures 2011 Budget
B. LOW INCOME 2010 Expenditures 2011 Budget
C. COMMERCIAL 2010 Expenditures 2011 Budget
D. INDUSTRIAL 2010 Expenditures 2011 Budget
E. OTHER 2010 Expenditures 2011 Budget
F. EM&V 2010 Expenditures 2011 Budget
PROGRAMS TOTAL 2010 Expenditures 2011 Budget
NORTHEAST MIDWEST SOUTH WEST CANADA
$141,840,646 $212,280,739 $106,088,653 $145,780,514 $21,530,047 $30,748,053 $119,492,692 $122,642,121 $16,588,930 $19,152,543
$53,447,338 $86,021,061 $46,322,831 $52,215,249 $3,811,443 $4,238,057 $76,802,645 $80,145,941 $8,037,093 $18,461,009
$70,050,491 $128,980,619 $31,337,250 $57,617,996 $1,221,067 $4,168,451 $77,814,802 $85,966,533 $19,345,395 $21,170,247
$433,913 $2,736,844 $6,786,613 $2,110,491 $278,540 $441,596
$5,998,097 $23,690,228 $23,702,305 $26,394,863 $792,330 $1,236,457 $28,704,568 $64,531,039 $22,354,565 $33,116,936 $59,197,300 $115,852,587 $81,551,865 $148,969,523
$2,197,405 $12,315,635 $273,967,889 $466,025,127 $4,555,191 $5,877,203 $218,792,843 $289,996,316 $143,585 $385,788 $27,777,012 $41,218,402
$12,145,112 $31,071,152 $9,027,136 $13,180,632 $19,644,178 $36,360,083 $28,671,313 $49,540,715
$2,485,614 $7,959,569 $317,445,433 $392,316,355 $736,784 $391,986 $76,089,904 $105,473,353
UNITED STATES $388,952,038 $511,451,426 $180,384,256 $222,620,308 $180,423,610 $276,733,599
$9,381,795 $26,538,195 $837,983,177 $1,189,556,199 $10,118,579 $26,930,181 $914,073,081 $1,295,029,552
N. AMERICA
$405,540,968 $530,603,969 $188,421,350 $241,081,317 $199,769,005 $297,903,847
APPENDIX D NATURAL GAS EFFICIENCY PROGRAM SAVINGS IMPACTS BY REGION
REGION NORTHEAST MIDWEST SOUTH WEST CANADA UNITEDSTATES NORTHAMERICA
RESIDENTIAL 143,563,769 87,286,004 3,846,194 84,541,510 112,490,203 319,237,478 431,727,681
LOWINCOME 21,311,150 14,718,753 449,357 11,812,093 122,623,081 48,291,353 170,914,434
COMMERCIAL 112,968,955 46,599,661 1,372,627 76,942,933 260,873,450 237,884,176 498,757,626
INDUSTRIAL 5,439,883 38,454,811 39,185 118,307,030 40,588,192 162,240,908 202,829,100
OTHER 4,284,730 17,018,010 19,240,601 1,266,233 40,543,341 41,809,574
TOTALTHERM 287,568,487 204,077,238 5,707,363 310,844,168 537,841,159 808,197,257 1,346,038,416
TRILLIONBTU
28.8 20.4 0.6 31.1 53.8 80.8 134.6
APPENDIX E SURVEY PARTICIPANT COMPANIES

COMPANY AmerenIllinoisUtilities(AmerenCorporation) ArkansasOklahomaGasCorporation ATCOGas AtmosEnergyColorado AtmosEnergyIowa AtmosEnergyKentucky AtmosEnergyMidTexasDivision AtmosEnergyMissouri AtmosEnergyWestTexasDivision AvistaUtilitiesIdaho(AvistaCorp.) AvistaUtilitiesOregon(AvistaCorp.) AvistaUtilitiesWashington(AvistaCorp.) BaltimoreGasandElectricCorporation(ConstellationEnergy) BerkshireGasCompany,The(UILHoldingsCorp) BlackHillsEnergyIowa(formerlyAquila) BlackHillsEnergyCorporationColoradoGas(formerlyAquila) CascadeNaturalGasCorpOregon(MDUResourcesGroup) CascadeNaturalGasCorpWashington(MDUResourcesGroup) CenterPointEnergyArkansas CenterPointEnergyMinnesota CenterPointEnergyOklahoma CentralHudsonGas&ElectricCorporation ChattanoogaGasCompany(AGLResourcesInc.) CheyennePowerandLightCompanyWyoming(BlackHillsCorp) CitizensEnergyGroup CityGasCompany CityofPaloAlto CityUtilitiesofSpringfield ColoradoNaturalGas,Inc.(SummitEnergy) ColumbiaGasofKentucky(NiSourceInc.) ColumbiaGasofMaryland(NiSourceInc.) ColumbiaGasofMassachusetts(formerlyBayStateGasCompany NiS I ) ColumbiaGasofOhio(NiSourceInc.) ColumbiaGasofPennsylvania(NiSourceInc.) ColumbiaGasofVirginia(NiSourceInc.) ConnecticutNaturalGasCorp(UILHoldingsCorp) ConsolidatedEdisonofNewYork(ConsolidatedEdison,Inc.) ConsumersEnergy(CMSEnergyCorporation) CorningNaturalGas DeltaNaturalGasCompany,Inc. DominionEastOhio(DominionResources,Inc.) DukeEnergyCorporationKentucky DukeEnergyCorporationOhio ElizabethtownGas(AGLResourcesInc.) EmpireDistrictGasCompany,The EnbridgeGasDistributionInc. EnbridgeSt.LawrenceGas EnergyTrustofOregonFOROR&WA EquitableGasCompanyLLCPennsylvania(EQTCorp.) FitchburgGasandElectricLightCompanyD/B/AUnitil M h FloridaCityGas(AGLResourcesInc.)
STATEOR PROVINCE
COMPANY FloridaPublicUtilities(ChesapeakeUtilitiesCorp.) FortisBC GreatPlainsNaturalGasCo(MDUResourcesGroup) IntermountainGasCompanyIdaho(MDUResourcesGroup) InterstatePowerandLightCompanyIowa(AnAlliantEnergy C ) InterstatePowerandLightCompanyMinnesota(AnAlliantEnergy C ) LaCledeGasCompany(TheLaCledeGroupInc.) MadisonGasandElectricCompany(MGEEnergy) ManitobaHydro MichiganGasUtilitiesCorporation(IntegrysEnergyGroup) MidAmericanEnergyCompanyIllinois MidAmericanEnergyCompanyIowa MidAmericanEnergyCompanyNebraska MidAmericanEnergyCompanySouthDakota MidwestNaturalGasCorp. MinnesotaEnergyResourcesCorporation(IntegrysEnergyGroup) MissouriGasEnergy(SouthernUnionCompany) MontanaDakotaUtilitiesCoMontana(MDUResourcesGroup) MontanaDakotaUtilitiesCo SouthDakota(MDUResources G ) MontanaDakotaUtilitiesCoWyoming(MDUResourcesGroup) NationalFuelGasDistributionCorporation(NationalFuelGas C ) NationalGridDownstateLongIsland NationalGridDownstateRhodeIsland NationalGridMassachusetts NationalGridNewHampshire NationalGridNewYorkCityDownstate NationalGridNewYorkUpstate NewJerseyBoardofPublicUtilities(forNewJerseyCleanEnergy P ) NewJerseyNaturalGasCompany(NewJerseyResources) NewMexicoGasCompany(ContinenalEnergySystemsLLC) NewYorkStateElectric&Gas(IberdrolaUSA) NewYorkState EnergyResearchandDevelopmentAuthority(or NYSERDA) NicorGas(NicorInc.) NorthernIndianaPublicServiceCompany(NiSourceInc.) NorthernUtilitiesMaine,D/B/AUnitil NorthernUtilitiesNewHampshire,D/B/AUnitil NSTARElectric&GasCorporation NVEnergy,Inc.(formerlySierraPacificResources) NWNaturalOR NWNaturalWA Orange&RocklandUtilities,Inc.(ConsolidatedEdisonInc.) PacificGasandElectricCompany(PG&ECorporation) PECOEnergy(ExelonCorporation) PeoplesGas/NorthShoreGas(IntegrysEnergyGroup,Inc.) PeoplesNaturalGasCompany(formerlyDominionPeoples) PhiladelphiaGasWorks PiedmontNaturalGasCompany,IncSouthCarolina PiedmontNaturalGasCompany,Inc. PublicInterestEnergyResearchProgram(PIER) PublicServiceElectricandGasCompany(PSEG) PugetSoundEnergy(PugetEnergy)
STATEOR PROVINCE
IL AR AB CO IA KY TX MO TX ID OR WA MD MA IA CO OR WA AR MN OK NY TN WY IN WI CA MO CO KY MD MA OH PA VA CT NY MI NY KY OH KY OH NJ MO ON& QC NY OR PA MA FL
FL BC MN ID IA MN MO WI MB MI IL IA NE SD WI MN MO MT SD WY NY NY RI MA NH NY NY NJ NJ NM NY NY IL IN ME NH MA NV OR WA NY CA PA IL PA PA SC NC CA NJ WA
COMPANY QuestarGasCompanyUtah QuestarGasCompanyWyoming RochesterGas&Electric(IberdrolaUSA) SanDiegoGas&ElectricCompany(SEMPRAEnergy) SaskEnergy SourceGasDistribution(SourceGasLLC) SourceGasArkansas(formerlyArkansasWesternGasCo) SouthJerseyGas(SouthJerseyIndustriesInc.) SouthernCaliforniaGasCompany(SEMPRAEnergy) SouthernConnecticutNaturalGasCompany(UILHoldingsCorp) SouthwestGasCorporationArizona SouthwestGasCorporationCalifornia SouthwestGasCorporationNevada St.CroixValleyNaturalGasCompany,Inc. SuperiorWater,Light&PowerCompany(ALLETE) TECOPeoplesGas(TECOEnergy,Inc.) TexasGasService(ONEOK,Inc.) TheMichiganConsolidatedGasCompany(DTEEnergyCorp) UGICentralPennGas(UGICorporation) UGIGasService(UGICorporation) UGIPennNaturalGas(UGICorporation) UnionGasLimited(SpectraEnergy) UNSGas(UniSourceEnergy) VectrenEnergyDeliveryofIndiana(VectrenCorporation) VectrenEnergyDeliveryofOhio(VectrenCorporation) VermontGasSystems,Inc.(NorthernNewEnglandEnergy C i ) VirginiaNaturalGas(AGLResourcesInc.) WashingtonGasLightCompanyVirginia(WGLHoldings,Inc.) WeEnergies(WisconsinEnergyGroup) WestfieldGas&ElectricDepartment WisconsinEnergyConservationCorporation(forFocusonEnergy P ) WisconsinPowerandLight,AnAlliantEnergyCompany WisconsinPublicService(IntegrysEnergyGroup) XcelEnergyInc.Colorado XcelEnergyInc.Minnesota XcelEnergyInc.NorthDakota XcelEnergyInc.Wisconsin YankeeGasService(NortheastUtilities)
STATEOR PROVINCE
UT WY NY CA SK CO AR NJ CA CT AZ CA NV WI WI FL TX MI PA PA PA ON AZ IN OH VT VA VA WI MA WI WI WI CO MN ND WI CT

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Natural Gas Efficiency Programs Report

2010 Program Year

III. NATURAL GAS EFFICIENCY PROGRAM PLANNING AND EVALUATION .........................................................38

Natural Gas Efficiency Programs Report 2010 Program Year, Page 3 of 67

METHODOLOGY AND SURVEY SAMPLE

Natural Gas Efficiency Programs Report 2010 Program Year, Page 5 of 67

I. NATURAL GAS EFFICIENCY PROGRAM CHARACTERISTICS

Ratepayer-Funded Natural Gas Efficiency Programs in 2010

Natural Gas Efficiency Programs Report 2010 Program Year, Page 6 of 67

Program Characteristics and Structure

COMPANYTYPE InvestorOwnedNaturalGasDistributor InvestorOwnedGas&ElectricUtility MunicipallyOwnedUtility

PERCENTAGE 65% 34% 2%

Natural Gas Efficiency Programs Structure

Gas Only (80)

Gas Ef f iciency Program Characteristics

Natural Gas Efficiency Programs Report 2010 Program Year, Page 7 of 67

YEARSINSERVICE Lessthan1(2010start) 1<10 10<20 20ormore

Natural Gas Efficiency Programs Report 2010 Program Year, Page 8 of 67

UtilityAdministered NonprofitOrganization GovernmentAgency OtherEntity UtilityWorkingwithOtherEntities TwoorMoreNonUtilityEntities

PERCENTAGE 66% 6% 3% 1% 21% 4%

Natural Gas Efficiency Programs Report 2010 Program Year, Page 9 of 67

FULLTIMEEQUIVALENTSTAFF OneorLess 1><5 5<10 10<25 25<50 50ormore

PERCENTAGE 26% 45% 11% 8% 5% 5%

Natural Gas Efficiency Programs Report 2010 Program Year, Page 10 of 67

TRADEPARTNER Manufacturers EquipmentDistributors Retailers Contractors Other

PERCENTAGE 33% 56% 67% 99% 10%

GOAL DirectImpactonEnergySavings BehaviorChange MarketTransformation DirectImpactonAvoidedEmissions Other

Customer Segments and Participants

Natural Gas Efficiency Programs Report 2010 Program Year, Page 12 of 67

C&I 75PROGRAMS 148,127 176,663

Low Income Programs

Natural Gas Efficiency Programs Report 2010 Program Year, Page 13 of 67

Energy Efficiency Activities and Products

Natural Gas Efficiency Programs Report 2010 Program Year, Page 14 of 67

QualityInstallation Tuneup/ControlsUpgrade DirectHeatingEquipment

Dishwashers ClothesWashers Storage

WINDOWS NEWCONSTRUCTION HOUSERETROFIT OTHER

AnyProduct WholeHome WholeHome

QualityInstallation GasFiredPackagedUnitaryEquipment UnitHeaters Tuneup/ControlsUpgrade

Dishwashers ClothesWashers Storage

KITCHENS NEWCONSTRUCTION RETROFIT

AnyProduct WholeBuilding WholeBuilding

29% 20% 27% 36% 22%

58% 52% 43% 61% 17%

Natural Gas Efficiency Programs Report 2010 Program Year, Page 16 of 67

2010 Natural Gas Efficiency Incentives Program Expenditures by Sector

Commercial $93.1 million

Gas Efficiency Program Chracteristics

$35 $35 $20 $20 $25 $120 $40 $225

$1,000 $3,000 $100 $100 $550 $800 $10,000 $8,000 $260

$35 $35 $20 $20 $50 $500 $250 $100

$4,500 $5,000 $100 $100 $1,400 $800 $5,000 $8,000 $25

$25,000 $25,000 $ 100,000

$25 $10 $30 $100 $25

$100 $25,000 $ 100,000 $3,600,000 $15,000 4 5 1 $10,000 $3,600,000 $ 500,000

Natural Gas Efficiency Programs Report 2010 Program Year, Page 19 of 67

PerkBtu/hr:$1.5to$2 Upto50%ofincrementalcost Upto40%ofcost

Natural Gas Efficiency Programs Report 2010 Program Year, Page 21 of 67

6 9% 6 10% 0 0% 4 21% 6 9% 6 12% 4 9% 4 10% 4 21% 4 9% 4 11% 4 17% 5 16% 1 6%

6 9% 4 7% 1 17% 1 5% 5 8% 4 8% 3 7% 2 5% 3 16% 3 7% 1 3% 2 9% 1 3% 2 13%

PROGRAM PERCENTAGE 38% 33% 13% 17%

PROGRAM PERCENTAGE 33% 63% 0%

Natural Gas Efficiency Programs Report 2010 Program Year, Page 25 of 67