Public Benefit Charge Funded Performance Contracting Programs – Survey and Guidelines

This paper discusses the evolution of performance contracting programs that are included in energy efficiency activities supported by Public Benefit Charge (PBC) funds. Between 1998 and 2002, on the order of $400 million of ratepayer funds are or expected to be committed for these programs in California, Colorado, New York, Texas, and Wisconsin. We summarize several programs that encourage performance-based contracting either through standard performance contracting (e.g., California, New York and Texas), demandside bidding (Colorado) or contractor support programs (Wisconsin). The programs are selected in part to illustrate differing program objectives as well as the relationship between goals and program design. Our major findings and recommendations are:

1. Performance-based programs can be an effective mechanism for encouraging new, energy efficiency projects between energy efficiency service providers (EESP) and customers in large commercial/industrial markets, although they must be carefully designed so as not to impose contracting mechanisms that will ultimately not be accepted by either contractors or customers.
2. Based on experiences in California, standard performance contracting programs should not be pursued in single-family residential markets; and innovative approaches and program designs are needed in small commercial/industrial markets if performance-based programs are to succeed.
3. Measurement & verification (M&V) efforts in these programs should focus on ensuring effective use of public goods funds and tracking of aggregate program impacts, rather than requiring that stringent M&V protocols be used over the economic lifetime of measures installed at each project. We believe that rigorous M&V at project sites can still be effective in reducing performance uncertainties associated with certain high efficiency technologies (e.g., controls), although M&V should be significantly simplified for other energy efficiency technologies where there is a wealth of existing data on saving