Tearing Down Barriers

1

• Tearing Down Barriers
• To Energy Efficiency
• Kansas Wind Renewable Energy
• Conference, 2008
• September 24, 2008
• Michael Volker

2
Agenda

• Midwest Energy, Inc.
• What is HowmartSM?
• How the Program Works.
• The Conservation Plan (Products).
• Results to Date.
• Pictures, Challenges, Thanks.

3
Can a Small Utility Provide High-Quality Energy
Efficiency Services?

• Vertically integrated, customer-owned utility.
• 89,000 gas and elec. customers, 41 counties.
• Average age of home 34 years old.
• Only RESNET certified Energy Raters in western
  Kansas.
• Provide wide variety of EE Services

4
Energy Efficiency Programs

• Air infiltration tests (blower door - 50).
• Infrared scans (heat loss/gain - 75).
• Duct leakage tests (duct blaster - 50).
• HVAC sizing (0)
• Walk-thru audits (0).
• Many more Res and CI services.

4
5
HowmartSM and Efficiency

• Objective
• Stop market failure.
• Landlord/Tenant split incentives.
• First-Cost barrier.
• Builder/Buyer education.

6
What is HowmartSM ?

• A program that ties investments in energy
  efficiency to basic utility service.
• No upfront capital required by building owner.
• Efficiency improvements paid for through a
  surcharge on the utility bill.
• The surcharge is less than the amount of savings.
  
• The surcharge is tied (by tariff) to the
  location, not to the customer.

HowmartSM is patterned after the PAYSTM
(Pay-As-You-SaveTM) concept marketed by PAYS
America. See www.PAYSAmerica.org.
7
1. Efficiency With No Upfront Capital

• MWE pays for efficiency improvements.
• Building Owners can buy down cost of efficiency
  improvements.
• Partnership with KHRC (KEEP program) lowers
  cost of capital.

7
8
2. Efficiency Paid for on Utility Bill

• Fixed surcharge on monthly bill.
• Surcharge covers Company investment, cost of
  capital, and program costs.
• Maximum term 180 months or 75 of the expected
  life of the measure.

8
9
3. Surcharge is LESS than 90 of Savings

• MWE performs audit.
• MWE models energy and cost savings.
• MWE determines required surcharge (based on the
  cost of completing measures).
• Surcharge can be no more than 90 of savings.

9
10
4. Surcharge is Tied to a Location

• Energy savings are tied to a physical structure
  surcharge is as well.
• Surcharge continues at premise even if occupant
  changes.
• Requires disclosure.
• Disconnection for non-payment subject to same
  terms and conditions of utility service.

10
11
Products

• Thermal Shell Insulation, Caulking, Sealing,
  etc. (half of participants those that install
  on their own)
• HVAC Equipment High Efficiency Furnaces, AC,
  etc. (Avg. AFUE 92.4, SEER 14.3)
• Others? Must be a permanent part of structure
  not portable (No CFLs, Washer/Dryers, etc.)

12
Midwest Energy Efficiency Analysis

• Heat loss/gain calculations
• Air leakage test
• IR scan (optional)
• Furnace combustion check
• Duct leakage test (optional)
• Establish and validate a baseline (using sales
  history)

13
Example Preliminary Conservation Plan
Base House 2400 sq ft, R-7 Attic, 0 Wall
Insulation, High Air Leakage, 64 Furnace, 6 SEER
A/C Option 1 New 92 Furnace/14 SEER AC at
7,200 Option 4 All Measures at
11,000 Option 2 R-38 Attic Insulation at
1,700 Option 5 Option 1 with 1k
contribution from owner Option 3 R-38 Attic,
Air Sealing at 2,700 Term 15 years at 4.0
5 program fee
14
Results of Pilot Programas of 9-22-2008

• 290 Conservation Plans.
• 60 completed HowmartSM projects.
• 130 pending projects.
• Invested 268,000 in efficiency improvements,
  average 4,546.
• Average HowmartSM charge 39.41/mo.
• Average estimated savings 49.12/mo. (24.6
  more than HowmartSM charge).

15
Results of Pilot ProgramEnergy Savings Results

• Eight HowmartSM projects with two winters of
  comparative data. The average gas consumption
  change -17 despite 17 more Heating Degree
  Days in 2008 vs. 2007.
• Average SEER of installed ACs 14.3.
• Average AFUE of installed furnaces 92.4.
• Half the projects include thermal shell
  improvements through the program.

15
16
Additional Benefits SafetyWhat were they
thinking?
16
17
Efficiency Feeling Disconnected
17
18
Comfort Another Benefit
18
19
Challenges

• Shortage of contractors.
• Projects in the pipeline for 5 months.
• Premium contractor program?
• Free riders (audits are expensive).
• Screen customers better.
• 200 audit fee for non-participants.
• 41 Counties A lot of miles to cover.
• Energy Analysts located in Great Bend, Hays, and
  Colby.
• Spread the workload.

19
20
Industry Attention

• KCC, Staff, and CURB intervention made the
  program better.
• HowmartSM is the first voluntary PAYS type
  program.
• Chartwells Best Practice Award (April 2008).
• AESP Annual Meeting white paper selection.
• ACEEE Summer Program on Energy Efficiency
  Programs white paper selection.

20
21
Questions, Comments, Concerns?

• ?
• The End
• Michael Volker
• Midwest Energy, Inc.
• 785-625-1476 mvolker_at_mwenergy.com

22
Program Steps

• Customer requests HowmartSM audit. (NOTE
  Almost no marketing effort to date)
• Customer pre-screened, audit scheduled.
• Audit completed, Preliminary Conservation Plan
  Developed measures identified.
• Contractors bid to complete efficiency measures.

23
Program Steps (cont.)

• All forms signed.
• Contractor(s) complete work.
• Upon completion, contractor is paid.
• HowmartSM charges added to monthly bill.
• Evaluations.

24
Backup InformationParticipant Requirements

• Customer in good standing.
• Owner must sign a HowmartSM Owned-Property
  Agreement or Landlord and Tenant must sign a
  HowmartSM Rented/Leased Property Agreement.
• Sign the Conservation Plan.

25
What is HowmartSM (besides a best practice award
winner)?

• A program that ties investments in energy
  efficiency to basic utility service.
• No upfront capital required by building owner.
• Efficiency improvements paid for through a
  surcharge on the utility bill.
• The surcharge is less than the amount of savings.
  
• The surcharge is tied (by tariff) to the
  location, not to the customer.

HowmartSM is patterned after the PAYSTM
(Pay-As-You-SaveTM) concept marketed by PAYS
America. See www.PAYSAmerica.org. Chartwells
Best Practices for Utilities and Energy
CompaniesTM, April 2008.
25
26
Why Do This?

• Market failure in energy efficiency.
• Emphasis on energy efficiency by policymakers.
• Lower bills for program participants.
• Helps minimize expensive capacity additions.
• May help reach market that has been unable to
  invest in energy efficiency.
• Customers have asked for something like this.

26
27
Midwest Energy and the Kansas Housing Resource
Corporation

• Kansas Energy Efficiency Program (KEEP)
• Strategic partnership.
• KHRC loans 50 at 0.
• Lowers effective interest rate to 4.
• Expanding reach of KEEP.
• HowmartSM/KEEP partnership overcomes market
  barriers better.

27