Serving our customers CONSERVATION PLAN

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1 Servig our customers CONSERVATION PLAN

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3 cotets Itroductio from Steve Bicker What s ew for CONSERVATION at TACOMA POWER Coservatio Resources table COMMERCIAL / INDUSTRIAL PROGRAMS Bright Rebates New Costructio Custom Retrofit Strategic Eergy Maagemet Equipmet Rebates RESIDENTIAL PROGRAMS Retail Weatherizatio ad Heatig Systems Multifamily Commo Area Water Heatig Product Promotio LOW-INCOME / HARD-to-REACH Maufactured Home Direct Istall Retal Housig Sigle Family Weatherizatio Multifamily Weatherizatio EXTERNAL ENERGY CONSERVATION

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5 Dear Reader: Thak you for your iterest i Tacoma Power s Coservatio Pla. What follows is a program implemetatio roadmap explaiig how the Customer Eergy Programs group at Tacoma Power iteds to acquire its coservatio target pursuat to the requiremets of Washigto s Eergy Idepedece Act. Tacoma Power relies o two resources to serve about iety-five percet of its load: clea reewable hydropower ad coservatio. While hydropower is clea, low cost ad reewable, coservatio is arguably eve better. What kilowatt is better tha the oe you ever eed? The market ad regulatory climate affectig our coservatio programs is chagig. Much of the chage is a result of Tacoma Power s past successes i coservatio alog with atioal eergy efficiecy efforts. Almost every ew lamp, motor, ad appliace is more eergy efficiet these days. New buildigs use a fractio of the power required by older buildigs ad buildig owers have made strides i reducig eergy cosumptio. These treds affect our etire portfolio but have the biggest impact o the residetial sector. We remai committed to offerig a cost effective portfolio of programs to our customers while strivig to preserve the programs they value. We have worked creatively to reduce costs, repackage programs ad maximize eergy savigs i order to cotiue offerig most of the coservatio measures that have bee popular with our customers. I additio to portfolio offerigs from the former bieium, we will be offerig icetives for cetral heat pumps, heat pump water heaters, a commercial strategic eergy maagemet program ad simplified rebates for some of the most popular lightig measures. Despite our lower target, we expect to exceed targets i 2018 by a cosiderable margi due to several large commercial projects already scheduled for completio i Also, Tacoma Power is workig with the City of Tacoma to retrofit 16,000 streetlights to LEDs. It is my hope that implemetig this pla will beefit customers i two ways: by providig a low cost power resource that will help keep future rates lower ad by providig products ad services that delight our customers ad make them proud to be served by Tacoma Power. I hope you ejoy readig the pla. Please let me kow if you have questios ot addressed i the followig pages. Steve Bicker Sr. Maager, Customer Eergy Programs ad Assistat Power Maager sbicker@cityoftacoma.org Tacoma Power CONSERVATION PLAN 3

6 What s ew for Differeces Betwee ad The Coservatio Pla features sigificat chages to how Tacoma Power implemets eergy efficiecy programs i Customer Eergy Programs (CEP). While the previous 10 years have bee marked by programs ad egagemet strategies that focused o creatig a solid low-cost resource for Tacoma Power, programs of the foreseeable future will require more iovatio to preserve our market presece i a chagig marketplace ad icrease egagemet with all customer sectors. Lower Target Tacoma Power s Coservatio Potetial Assessmet (CPA) is 15.1 amw lower tha the CPA (Figure 1). Three factors explai the decrease: A lower power price forecast has eroded our potetial savigs overall Fewer cost effective residetial measures are available Accumulated savigs from 8 years of aggressive coservatio programs are ow i the baselie We believe these factors will persist i the ear to midterm. I total, the potetial is 32% less tha the potetial Figure CPA is 15.1 amw lower tha the CPA CPA CPA Distributio efficiecy Idustrial Commercial Residetial 4

7 Focus O the Utility Cost Test I 2017, we revised program ad measure cost effective guidelies to allow some programs to cotiue that would have bee deemed o-cost effective based o our traditioal Total Resource Cost Test (TRC). We ow also cosider the Utility Cost Test (UCT) that allows some additioal programs to be cost effective simply because they offer et beefits to our customers while helpig to keep rates lower. Uder these ew guidelies, we will offer ew measures ad programs to icrease customer egagemet. Chages to Assumptios ad Baselies Durig the bieium, the Boeville Power Admiistratio reduced ductless heat pump (DHP) savigs by 48%. I respose, we reduced our DHP icetives ad will elimiate DHP grats. While we recogize this will reduce low-icome program spedig, we are fidig ew ways to egage the low-icome commuity ad help our most vulerable customers. Capacity ad Demad Respose Past Itegrated Resource Plas (IRPs) showed Tacoma Power has sufficiet eergy resources. However, as a growig umber of itermittet reewable resources come olie, the regio is becomig capacity costraied. Tacoma Power, blessed with ample hydro resources i most years, does ot believe it will eed additioal capacity for system adequacy for several years, however, this chage i the market provides the utility a uique opportuity to serve its excess capacity to utilities that are already capacity costraied. For the Coservatio Pla, we ve icluded a capacity value for coservig eergy i the price forecast used to evaluate our programs. I 2018, we will begi a i-depth study to determie how to itegrate capacity ito existig programs ad explore whether we could offer stadaloe programs based o capacity beefits. Tacoma Power CONSERVATION PLAN 5

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9 CONSERVATION at TACOMA POWER Tacoma Power s programs provide iformatio, educatio, rebates ad loas to help our customers save eergy ad moey with better products ad practices. Our programs reduce loads ad over the log ru, cost the utility ad its ratepayers less tha ew power supply alteratives. Tacoma Power CONSERVATION PLAN 7

10 The Busiess Case for Coservatio The busiess case for eergy coservatio is compellig. Log term, eergy coservatio programs help Tacoma Power meet future eergy eeds without acquirig additioal supply-side resources, offerig real fiacial savigs to our customers ad helpig us meet regulatory requiremets. Load Resource Balace Our Itegrated Resource Pla (IRP) sets the foudatio for the busiess case uderlyig the Coservatio Pla. The IRP establishes a resource strategy to esure we ca meet our customers demad for electricity at a low cost with low risk. Through the IRP process, we idetified eergy coservatio as the oly eergy resource we eed to acquire for the ext 20 years (Figure 2). Additioally, eergy coservatio is available today ad costs less tha other resources (Figure 3). Figure 2 Figure 3 Coservatio is our lowest cost resource Eergy Coservatio $27 Gas (Comb. Cycle) $42 Wid $57 $ / MWh Utility Scale Solar $79 Gas Peaker (CT Frame) $155 8

11 Customer Beefits While eergy coservatio programs help keep customers eergy bills low i the log ru, program participats receive immediate fiacial savigs ad other o-eergy beefits such as comfort, safety, or improved worker productivity. The Coservatio Pla has a program for every customer i our service territory. Customers ca reduce their electricity costs as much as 30 percet by participatig i our eergy coservatio programs. It is well kow withi the idustry that eergy efficiecy programs improve customer satisfactio. J.D. Power reports that simply offerig eergy coservatio programs raises customer satisfactio scores by about 10 percet. Evirometal Stewardship I additio to load resource balace ad customer satisfactio, Tacoma Power feels a strog obligatio to make the best use of our hydroelectric resources. Eergy coserved through our coservatio programs allows our hydroelectric resources to serve more customers. This cotiues our traditio of offerig customers electricity that is almost etirely from clea, reewable hydroelectric resources. Legislative Madate I 2006, Washigto State voters voiced their desire for utilities to provide more eergy coservatio by passig Iitiative 937, also kow as the Washigto Eergy Idepedece Act (EIA) (RCW ). While primarily a reewable portfolio stadard, the EIA requires utilities with 25,000 customers or more to pursue all available coservatio that is cost-effective, reliable, ad feasible. To meet this stadard we must acquire a pro-rata share for a two year period of our 10 year coservatio potetial (RCW ). Policy for Coservatio Target ad Budget Settig Idetifyig the Coservatio Potetial Prior to settig a target or determiig our budget, we must calculate how much eergy coservatio opportuity remais i our service territory. The Coservatio Potetial Assessmet (CPA) calculates our potetial by comparig savigs from idividual coservatio measures to Tacoma Power s avoided cost of alterative power resources. The cost effective potetial takes ito accout the followig variables: Tacoma Power CONSERVATION PLAN 9

12 Avoided Cost Variables Avoided BPA power purchases. Lie loss savigs that occur because less power is trasmitted over the grid. Estimated value of geeratio capacity reserves that may be sold to other utilities. Estimated value of deferred trasmissio upgrades. Avoided Reewable Eergy Credit (REC) purchases reduced load results i fewer REC purchases to meet EIA (I-937) reewable eergy requiremets. Measure Variables Iitial measure cost ad lifetime maiteace costs. Expected measure life. Time-differetiated patter whe eergy savigs occur over the course of a year. Quatifiable ad moetizable beefits resultig from istallig the measure. Regulatory Variables 1980 Power Act gives coservatio a 10% advatage whe compared to geeratio resources. Estimated carbo cotet of our resource portfolio applied to carbo cost assumptios. Target Settig The EIA sets forth three requiremets goverig how Tacoma Power sets its coservatio target. 1. Total Resource Cost methodology must be used to set the target (WAC ). 2. The target applies to the compliace bieium ot to idividual years (RCW ). 3. The target is a sigle savigs amout ot a combiatio of idividual measure, program, or sector targets (RCW / WAC ). The utility hired Applied Eergy Group (AEG) to coduct our 2017 CPA. AEG examied more tha 7,000 uique coservatio measures usig methodology cosistet with the Northwest Power ad Coservatio Coucil (NWPCC) as required by RCW The CPA idetified 81.8 amw of techically achievable coservatio i our service territory over the decade. 10

13 The IRP defies Tacoma Power s avoided cost of ew margial resources. The sum of all measures from our coservatio potetial that cost less tha margial resources becomes the savigs target for the bieium. The CPA idetified 31.7 amw of achievable ecoomic coservatio i our service territory durig CEP s target, a pro-rata share of the achievable ecoomic potetial, is 6.4 amw. The target was preseted ad adopted by Tacoma Power s Public Utility Board o November 15 th (Resolutio U-10970). To esure that we do ot fail to achieve the EIA target, we set program goals ad budgets to achieve more tha our target. We pla eergy savigs beyod our target to maage risk, ot as a commitmet to acquire additioal coservatio. Buildig the Coservatio Pla The Coservatio Pla is based o CEP s educated estimates of how programs will work i our local market durig 2018 ad To build our Coservatio Pla, we use program-specific assumptios, icludig uit eergy savigs estimates ad umbers of uits delivered per year, to develope the portfolio. There is o legal requiremet to implemet these programs as described. Our Coservatio Pla is a risk maagemet tool idividual programs may uder or over perform due to the upredictable ature of the eergy efficiecy markets. Additioally, some measures i this pla are placeholders for future activity, some of which may ever materialize. Coversely, ew cost-effective measures may materialize after the pla is writte ad be swiftly implemeted. Reportig Accomplishmets As required by Washigto State statue, Coservatio accomplishmets are reported to the Washigto State Departmet of Commerce. We documet ad report the acquired coservatio savigs usig BPA s IS 2.0 reportig system. BPA s Uit Eergy Savigs (UES, also kow as deemed savigs ) values ad protocols are guided by iformatio from the Regioal Techical Forum (RTF), a techical advisory committee to the Northwest Power ad Coservatio Coucil established i 1999 to develop stadards for verifyig ad evaluatig eergy efficiecy savigs. Tacoma Power CONSERVATION PLAN 11

14 Coservatio Budget Risk Mitigatio The Coservatio Pla aligs with the state s EIA I-937 reportig bieium. However, Tacoma Power s budget is based o the City of Tacoma s bieial budget cycles. This supports a accurate plaig process ad provides some risk mitigatio, but somewhat costrais 2018 activity to our approved budget. Refereces to 2019 expeditures ad budget allocatios are estimates. Actual budget will require Public Utility Board approval of Tacoma Power s capital ad O&M budget. Curretly CEP has a approved budget of $32,869,600. A additioal $1,570,000 of support for programs is budgeted i workgroups outside of CEP, icludig TPU marketig ad Eergy Resource Plaig ad Evaluatio. Coservatio icetives paid to Tacoma Power customers are the largest expese category, accoutig for approximately 52% of plaed expeses. CEP staff labor accouts for 30% of plaed expeses, with geeral overhead ad costs outside CEP accoutig for the remaiig 18% of plaed expeses. Our most serious budget risk is overspedig our coservatio icetive budget. Large commercial ad idustrial projects ca receive icetives over $1 millio ad have lead times up to several years with ucertai completio schedules. Whe these projects shift ito a differet budget bieium, it ca cause sigificat budget pressure. Despite our market kowledge ad use of good research, it is difficult to predict which efficiet products will be popular ad whe ew techologies will be available i the market. Some are red-hot sellers while others ever make it off the groud. Regioal ad local ecoomic drivers beyod our cotrol may drive participatio above (or below) plaed levels. To maage these risks, we maitai a budget reservatio system. The system esures fuds are ot promised to more tha oe customer by trackig multiple large commercial projects, as well as forecasts for small projects, to esure we are ot overcommittig fuds. If the budget reservatio system idicates we could oversped, we respod by rampig programs dow, reducig icetives, or askig for additioal fuds before depletig our budget. 12

15 Sesitivity Aalysis Tacoma Power uses a Mote Carlo approach i budget plaig. It models multiple program outcomes across the coservatio portfolio to esure plaed acquisitios ad budgets are adequate to meet regulatory ad load/resource eeds. This model uses assumptio rages based o program history ad staff kowledge to iform 10,000 model rus that predict market outcomes. Figure 4, illustrates the probability of outcomes give program variability for 10,000 combiatios of program performace factors. Figure 4 Probability of Outcomes Give Program Variability Aalysis i Figure 4 shows our portfolio met or exceeded the target i all model rus. Based o this aalysis, abset a radical policy chage or market shift, CEP is cofidet its portfolio will meet Tacoma Power s acquisitio eeds. Figure 5, illustrates Tacoma Power s CEP budget is sufficiet to meet the 6.4 amw target. Figure 5 Estimated Expeses Give Program Variability Based o the aalysis discussed above, CEP will reduce its capital icetive budget ask to $15,092,000. This will better alig projected spedig with our budget. I the evet it appears we will exceed our budget we will either ask for additioal fuds from the utility, reduce icetives, or susped program erollmet. Tacoma Power CONSERVATION PLAN 13

16 Fially Figure 6, shows which programs i our portfolio have the most sigificat budget variability. Figure 6 - Programs with Highest Variability Cotributio to Variace View The portfolio is most sesitive to large C/I projects 2019 CI Stategic Eergy Maagemet 31.1% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0% 28.0% 32.0% 36.0% 2018 CI Large Custom Retrofit 2019 CI Bright Rebates 2019 CI Custom Retrofit 2018 CI Custom Retrofit 2018 CI Stategic Eergy Maagemet 2019 NEEA 2018 NEEA 2019 MFG Direct Istall 2018 CI Bright Rebates Other 14.5% 8.6% 8.4% 7.6% 7.6% 6.6% 6.5% 2.6% 1.8% 6.5% Portfolio Desig Priciples CEP cosiders three key priciples i desigig the coservatio portfolio: 1. Coservatio programs are based o solid aalysis. Update assumptios to esure to esure they are curret. Pla to meet or exceed EIA targets. 2. Coservatio programs must satisfy customers. Work to be certai that products will be embraced by customers. Cofirm that icetive optios are appropriate to customer eeds. Uderstad how customers use programs. Promote our programs with crosscuttig marketig strategies. 3. Coservatio spedig must be equitably distributed All ratepayers fud coservatio ad should have a opportuity to participate i oe or more of our programs. We strive to create a portfolio that addresses all of these desig priciples i reasoable balace. 14

17 Coservatio is Aalysis Drive Tacoma Power evaluates cost effectiveess usig the same cost curves that were used i developig the IRP. While the Total Resource Cost Test (TRC) aloe is used to set the EIA target (WAC ), we have begu usig the Utility Cost Test (UCT) to admit some programs to the portfolio that would fail uder the TRC which does t recogize o-moetized eergy beefits to customers. To be recogized as cost effective, programs must have a positive TRC beefit-to-cost ratio or a positive UCT beefit-to-cost ratio. Total Resource Cost Test (TRC) The TRC compares the preset value of total beefits to the preset value of total costs paid by Tacoma Power ad program participats over the life of the measure. The TRC is idifferet to who pays for the measure, focusig oly o total measure cost. Additioally, the test cosiders moetizable o-eergy beefits (NEBs), givig them equal weight as the value of eergy beefits. We express the TRC as a beefit-to-cost ratio, kow as the TRC B/C ratio. Measures ad programs with a TRC B/C ratio greater tha 1.0 are cosidered cost effective. TOTAL RESOURCE COST a d va ta g e s d i s a d va ta g e s Recogizes utilities eed to serve the public good Limits impact of free-riders Igores o-eergy beefits that are ofte critical to market acceptace of eergy efficiecy measures Does ot accurately compare utility costs with supply side alteratives Utility Cost Test (UCT) The UCT forecasts the fiacial impacts of coservatio programs o Tacoma Power. The UCT compares the costs of offerig a program, icludig utility-paid program costs, to the beefit of avoided power purchases over the life of the measure. We express the UCT as a beefit-to-cost ratio, kow as the UCT B/C Ratio. Measures ad programs with a UCT B/C ratio greater tha 1.0 are cosidered cost effective. Additioally, we express the UCT as a $/MWh cost for compariso to supply side resources. It s importat to ote that i a public utility, beefits to the utility traslate to ratepayer beefits. UTILITY COST TEST a d va ta g e s Accurately compares utility costs with supply side alteratives Allows the utility to promote higher cost coservatio measures desired by customers Focuses the utility o keepig costs low d i s a d va ta g e s Admits more programs ad measures to the portfolio that are affordable oly to higher icome customers May ecourage customers to purchase equipmet that is ot i their fiacial iterest Tacoma Power CONSERVATION PLAN 15

18 Participat Test (PT) The PT esures program participats are better off fiacially for participatig i our eergy coservatio programs. The PT compares the customer s out of pocket cost to purchase ad istall eergy efficiecy measures with the reduced eergy expeses ad quatifiable o-eergy beefits, such as maiteace, over the measure s life. We express the PT i terms of simple payback how log after istallatio it takes the customer to recover their ivestmet. While the participat test is ot used as a ecoomic scree, it is a importat perspective i gaugig if a program or measure is good for our customers. PARTICIPANT TEST a d va ta g e s d i s a d va ta g e s Best test of ecoomic value to customer Does a poor job of valuig o-eergy beefits, which are ofte major drivers behid purchasig eergy efficiet equipmet Coservatio Programs Must Satisfy Customers Simple fiacial icetives do ot chage the market by themselves. We compete with other home improvemet ivestmets, such as graite coutertops, for cosumer dollars. To compete, we must market programs to capture the customer s attetio ad motivate them to take actio. This is doe by observig what has bee referred to as the 4 P s of marketig: Price we leverage a combiatio of rebates, grats, istat markdows, ad loas to buy dow the cost of eergy efficiet products. To avoid egatively impactig rates, icetives should be just large eough to affect customer purchase decisio ad o larger. Product eergy efficiet products i our portfolio must satisfy customers. Customers do t soo forget programs that disappoit which affect the success of future programs. Promotio customers eed to uderstad why they should ivest i eergy efficiet products. Residetial marketig efforts eed to promote home comfort, as well as lower eergy costs. Commercial-Idustrial programs eed to promise ad deliver reduced overhead cost makig compaies more profitable ad competitive. Place itersectig with customers where they iteract with the market through market actors already servig our customer. We call them trade allies third-party compaies ad cotractors who desig, sell or istall high-efficiecy equipmet or offer solutios that qualify for our icetive programs. Workig with qualified trade allies allows us to reach more of our customers tha our staff could do aloe. 16

19 Coservatio Must Be Distributed Equitably Amog Customer Groups Coservatio programs at Tacoma Power are fuded through power rates. Sice all customers pay rates, it is importat all customers have access to our eergy coservatio programs. While large commercial ad idustrial projects are more cost effective, residetial customers also have a equity stake i our programs. Low-icome customers pay a sigificat share of their household budget to heat older, poorly isulated homes. Providig eergy coservatio assistace helps customers lower their utility bills, which i tur improves the likelihood they will pay their bills o time. Coservatio Resources CEP proposes to acquire 9.99 amw of coservatio resources at a cost of $28,187,900 for the bieium. Table 1 below provides a broad ecoomic aalysis of sectors. Table 2 provides a detailed ecoomic aalysis of proposed programs. Table 1, below; Table 2, followig page Coservatio Portfolio TRC B/C UCT B/C RESOURCE COST [ $ / MWh ] SAVINGS [ amw ] SHARE OF SAVINGS BUDGET SHARE OF BUDGET 1 Commercial / Idustrial $21.97/ MWh 6.20 amw $13,360,900 Residetial $33.54/ MWh 1.49 amw $5,331,200 Low-icome / Hard-to-reach $50.94 / MWh 0.44 amw $3,657,000 2 Exteral eergy coservatio $5.12 / MWh 1.87 amw $1,019,300 Coservatio totals ad averages $ amw $28,187, Pie charts do ot iclude admiistrative overhead; oly costs directly associated with the sector ad its programs. Numbers ad visuals rouded to the earest hudredth. 2 Low-icome / Hard-to-reach admiistrative overhead icluded i the residetial sector. 3 Icludes $3,249,500 coservatio overhead, $1,220,000 evaluatio ad plaig overhead, ad $350,000 marketig ad commuicatio overhead. Tacoma Power CONSERVATION PLAN 17

20 Coservatio Portfolio PLANNED SAVINGS TRC UCT RESOURCE COST PARTICIPANT MEASURE COST PLANNED PLANNED PROGRAM / SECTOR amw B/C RATIO B/C RATIO $ / MWh PAYBACK UTILITY : CUSTOMER INCENTIVES OVERHEAD Coservatio Portfolio ($27.15) /a 57 : 45 $14,713,144 $13,474,860 Portfolio Overhead $3,249,483 EPRE Overhead Est. $1,220,000 MarComm Overhead Est. $350,000 Commercial / Idustrial ($21.97) /a 58 : 42 $9,026,272 $4,334,636 Bright Rebates ($16.79) 2 Years 53 : 47 $2,754,340 $921,510 New Costructio ($17.08) 2 Years 67 : 33 $3,019,728 $367,634 Custom Retrofit ($23.65) 5 Years 54 : 46 $2,816,280 $879,422 Strategic Eergy Maagemet ($29.14) 0 Years 100 : 0 $283,824 $454,898 Equipmet Rebates ($30.02) 4 Years 36 : 64 $152,100 $117,782 C/I No-Program Overhead $1,593,390 Residetial ($33.54) /a 38 : 62 $2,453,180 $2,878,006 Retail ($22.49) 2 Years 47 : 53 $1,188,000 $1,002,869 Weatherizatio ad Heatig Systems ($32.36) 13 Years 27 : 73 $946,380 $541,970 Multifamily Commo Area ($23.78) 1 Years 73 : 27 $166,800 $84,422 Water Heatig ($45.66) 2 Years 68 : 32 $100,000 $47,149 Product Promotio ($46.92) 0 Years 100 : 0 $52,000 $30,247 Res No-Program Overhead $1,171,349 Coservatio Programs sub-total ($28.59) $11,479,452 $12,032,125 Low-icome / Hard-to-reach ($50.94) /a 76 : 24 $2,760,651 $896,435 Maufactured Home Direct Istall ($46.25) 0 Years 100 : 0 $1,096,250 $56,308 Retal Housig ($52.58) 5 Years 67 : 33 $749,996 $359,140 Sigle Family Weatherizatio ($56.39) 0 Years 100 : 0 $718,136 $353,747 Multifamily Weatherizatio ($47.71) 22 Years 28 : 72 $196,270 $127,240 Exteral Programs ($5.12) /a /a $473,040 $546,301 City of Tacoma Street Lightig /a /a 6 Years 0 : 100 $0 $0 Northwest Eergy Efficiecy Alliace ($29.63) /a 100 : 0 $473,040 $528,599 T&D Voltage Optimizatio /a /a 1 Years /a $0 $17,702 1 Excludes low-icome / hard-to-reach, exteral programs, ad costs budgeted outside CEP. 2 Low-icome / Hard-to-reach admiistrative overhead icluded i the residetial sector. 18 Tacoma Power CONSERVATION PLAN 19

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22 COMMERCIAL / INDUSTRIAL PROGRAMS Tacoma Power offers busiess owers a diverse set of programs to help them save eergy. Some programs, such as Bright Rebates ad Custom Retrofit, use site specific characteristics ad pay icetives based o custom calculatios. Other programs, such as the Equipmet Rebates program, pay a fixed icetive based o measures with deemed savigs. These programs give us a diverse toolset to help busiess owers save moey while Tacoma Power acquires low cost eergy resources. Tacoma Power CONSERVATION PLAN 21

23 Bright Rebates COMMERCIAL / INDUSTRIAL PROGRAM Program Overview: 30% Lightig is oe of the best ivestmets customers ca make to improve efficiecy i their busiess. The ewest LED lightig techology is ot oly more efficiet but requires less maiteace ad provides superior light. Measures iclude, but are ot limited to: Iterior ad exterior lightig Lightig cotrols Street lightig Percetage of plaed eergy savigs from the C/I sector $3,675,850 Plaed Capital ad O&M expeditures $16.79 / MWh Plaed levelized costs 3.0 UCT B / C ratio 2.7 TRC B / C ratio 1.85 amw Eergy savigs How Customers Participate: Customers typically work directly with our lightig trade allies: electrical cotractors, distributors, eergy service compaies (ESCOs), ad maufacturers represetatives allied with our program. Trade allies kow what equipmet will work best for customer s eeds ad assist customers with program documetatio. Alteratively, customers may cotact CEP staff or Tacoma Public Utilities accout executives directly Plaed Chages: I respose to a dramatic reductio of Tubular-Light Emittig Diode (T-LED) cost, we will reduce T-LED icetives to $4 per replaced lamp ad screw-i LEDs to $1 per replaced lamp. Additioally, we will reduce our maximum project payout from 70% of total project cost to 60% of total project cost. The decliig cost of lightig retrofits, drive by lower LED prices, allows us to make these chages while havig miimal impact o our customers. 22

24 Risks: Bright Rebates has bee a cosistet top performer i our portfolio. This pla assumes program participatio will wae i the future because icetives have bee stable sice 2008 ad may projects i our service territory are already doe. However, a few large projects remai o the horizo. If these projects materialize ad program demad remais strog, available staff resources ad icetive fudig could be limited. I 2017, the RTF modified savigs calculatio to icorporate a duel baselie methodology for lightig retrofit projects. This methodology reduces measure life based o the legth of time existig equipmet has bee istalled. We do ot feel this approach aligs with coditios observed i the field, with frequet observatio of lightig systems operatig well past assumed measure lives. However, if this chage is adopted by BPA, it would potetially strad low cost, cost effective coservatio resources. Promotio Strategy ad Icetives: We are parterig with the City of Tacoma to replace street lightig with LEDs. This project will provide a uique opportuity to reach small busiess customers through targeted outreach to busiess districts as the program moves through Tacoma. Street Lightig outreach is expected to icrease program awareess amog small busiess customers. Additioally, the Marketig Commuicatios group has created ew brochures that tie ito the There s a Rebate for That campaig. These efforts will be supported with a bigger web presece. Tacoma Power pays up to $0.18 per kwh 1 for Bright Rebates eergy savigs. Some measures, such as T-LEDS ad screw-i bulbs, have fixed icetives that average less tha $0.17 per kwh. Additioally, the Bright Rebates program offers techical desig assistace to help customers meet lightig eeds while reducig eergy cosumptio. Basis of Aalysis: C/I Bright Rebates were aalyzed usig average kwh. Four broad categories represetig typical ed uses were used to aalyze program cost effectiveess. Assumptios came from Tacoma Power s 2017 Coservatio Potetial Assessmet ad were reviewed by Tacoma Power s C/I lightig staff. 1 Paymets are based o first year savigs, with a maximum paymet of 70% of project cost. The cost cap will be reduced i the future. Savigs calculated usig the BPA Lightig Calculator, which provides a combiatio of rebates for deemed measures ad custom calculatios for complex projects. Tacoma Power CONSERVATION PLAN 23

25 New Costructio COMMERCIAL / INDUSTRIAL PROGRAM Program Overview: 28% Iterest i New Costructio icreased durig the bieium. The program provides icetives to customers, developers, ad desig professioals ivolved i multiple desig phases of ew costructio projects. New Costructio projects iclude all ew buildigs, ad major retrofits where buildig use chages substatially or a major reovatio would require the buildig to meet ew code stadards. The program focuses o three primary ed uses: Percetage of plaed eergy savigs from the C/I sector Lightig Heatig, Vetilatio, ad Air Coditioig (HVAC) Idustrial systems $3,387,400 Plaed Capital ad O&M expeditures $17.08 / MWh Plaed levelized costs 3.0 UCT B / C ratio 2.3 TRC B / C ratio How Customers Participate: Customers with ew costructio projects work through their architecture ad egieerig firms or through direct cotact with CEP staff. Staff members estimate eergy savigs, esure projects meet our cost effective stadards, ad coduct M&V to assure eergy savigs are realized. New Costructio program requiremets are desiged to be straightforward ad flexible, allowig customers to participate at all stages of desig amw Eergy savigs 24

26 Plaed Chages: Washigto State implemeted a ew eergy code i July Projects permitted after this time will fall uder the ew code ad will have lower icetives ad claimed savigs tha projects permitted prior to July The latest code update has complicated the baselie defiitio by allowig customers to choose from multiple optios for compliace. Tacoma Power is workig iterally to develop processes to stadardize baselie defiitios ad to maximize eergy savigs. Risks: New costructio i Tacoma has followed a boom-bust cycle. The curret cycle is tredig upwards as buildig i eighborig Kig Couty has experieced several years of rapid growth. The spillover effect has created may ew opportuities i our service territory, icludig mixed-use multifamily developmet. If the tred cotiues, or ew costructio begis to mimic activity i Kig Couty, staff resources could be straied ad icetive fudig could be exhausted. Promotio Strategy ad Icetives: Tacoma Public Utilities accout executives work closely with CEP staff to idetify ew projects ad promote the New Costructio program to customers. Our trade ally etwork is aother source of prospective projects. We pay a icetive of $0.20/kWh (up to 100% of icremetal cost) for eergy savigs that exceed either the Washigto State Eergy Code 3 or idustry stadard practice for measures ot regulated by code. The program also provides desig icetives to egage our customers early o i the desig process. Basis of Aalysis: The program was aalyzed o a per kwh basis usig three broad categories represetig typical ed uses: HVAC, lightig, ad idustrial systems. Assumptios came from Tacoma Power s 2017 Coservatio Potetial Assessmet ad were reviewed by Tacoma Power s C/I egieerig staff. The impact of future code chages could modify how we deliver the program i the future. As code becomes stricter, we will research ew methods for icetivizig efficiet desig, modifyig our program as ecessary. However, it s importat to ote that we support improved eergy codes. Capturig savigs durig costructio is oe of the least expesive ways to acquire coservatio resources. As codes become stricter, it becomes more difficult for the ew costructio program to acquire eergy savigs above code. 3 Paymets are based o first year savigs that exceed the Washigto State Eergy Code. Tacoma will pay up to 100% of the icremetal cost of the project above a code baselie solutio. Savigs calculated by Tacoma Power usig stadard idustry/rtf methods. Tacoma Power CONSERVATION PLAN 25

27 Custom Retrofit COMMERCIAL / INDUSTRIAL PROGRAM Program Overview: 23% Whe customers have uique eergy coservatio eeds they use the Custom Retrofit program to assess opportuities ad idetify optios. The program is desiged to work for a variety of projects, ragig from complex idustrial retrofits to relatively simple HVAC projects. The program offers custom tailored icetives for uique ofte large projects. These jobs offer o-site egieerig or other expert advice ad guidace. Measures iclude: Percetage of plaed eergy savigs from the C/I sector $3,695,700 Plaed Capital ad O&M expeditures Compressed air systems Heatig, vetilatio, ad air coditioig (HVAC) Motors, pumps, fas, ad their associated cotrols Idustrial process Measures ot covered by other programs $23.65 / MWh Plaed levelized costs 2.1 UCT B / C ratio 1.4 TRC B / C ratio 1.44 amw Eergy savigs How Customers Participate: Customers work through trade allies ad our coservatio egieers. Staff egieers estimate eergy savigs, esure projects meet Tacoma Power cost effective stadards, ad coduct measuremet ad verificatio (M&V) to assure eergy savigs are realized. We leverage BPA s EergySmart Idustrial Program to provide additioal techical support ad M&V assistace o large idustrial projects, providig additioal value to our customers. 26

28 Plaed Chages: I early 2017, we shifted away from applyig the TRC test as the sole metric for evaluatig Custom Retrofit projects. Shiftig to the UCT icreases customer egagemet by leveragig customer s willigess to pay ad reduces staff time required to calculate project cost relative to baselie. Additioally, we are explorig revisig the maximum project payout from 70% of total project cost to 60% of total project cost. Risks: Custom Retrofit projects ted to be large ad take a log time to complete. If several ew large projects materialized over a short period of time, staff resources could be straied ad icetive fudig could be exhausted. Custom Retrofit projects are at a greater risk of havig savigs reduced by a exteral audit tha other projects. As with all aalyses of this ature, aalysis is subject to some iterpretatio. This risk is greater for Custom Retrofit because of the iheret complexity of systems ivolved ad the uique ature of each project. Promotio Strategy ad Icetives: Tacoma Public Utilities accout executives work closely with CEP egieerig staff to idetify projects ad promote the Custom Retrofit program. This work is bolstered by our Strategic Eergy Maagemet (SEM) program that has the acillary beefit of educatig customers about eergy savigs ad feedig ew projects to the Custom Retrofit program. Tacoma Power pays a icetive of $0.23/kWh 2 for eergy savigs from our Custom Retrofit program, up to 70% of the project cost. Additioally, we fud eergy studies for complex projects. Study icetives are limited to 50% of study cost ad must be performed by a qualified egieerig firm. Basis of Coservatio Pla Aalysis: The program was aalyzed o a per kwh basis usig five broad categories represetig typical ed uses: HVAC/Chiller, Pumpig Systems, Cotrols, Drive/Motors, ad Idustrial Systems / Compressed Air. Assumptios came from Tacoma Power s 2017 Coservatio Potetial Assessmet ad were reviewed by Tacoma Power s C/I egieerig staff. 2 Paymets are curretly based o first year savigs, with a maximum paymet of 70% of project cost. The cost cap may be reduced i the future. Tacoma Power CONSERVATION PLAN 27

29 Strategic Eergy Maagemet COMMERCIAL / INDUSTRIAL PROGRAM Program Overview: 17% Large facilities ca realize sigificat eergy savigs by optimizig how they are maaged. The Strategic Eergy Maagemet (SEM) effort combies advaced meterig, employee egagemet, ad rigorous aalysis to maximize eergy savigs through improved operatios ad maiteace How Customers Participate: We offer three versios of BPA s Eergy Smart Idustrial SEM program to customers: Percetage of plaed eergy savigs from the C/I sector $738,700 Plaed Capital ad O&M expeditures $29.14 / MWh Plaed levelized costs 1.7 UCT B / C ratio 1.9 TRC B / C ratio 1.08 amw Eergy savigs Strategic Eergy Maagemet (SEM) serves large customers seekig ways to save eergy through system-wide operatios ad maiteace improvemets. A structured etwork of participats (a cohort ) is established to share best practices ad lear i a group settig. The program icludes group meetigs facilitated by SEM coaches, where participats lear from peer experiece. Tue Up also serves large idustrial customers, but is ot cohort-based. This offer focuses o operatios ad maiteace improvemets achievable through a iitial oe- to three-day tue-up evet to idetify eergy savig opportuities requirig little or o capital ivestmet. 28

30 Refrigeratio Operator Certificatio (ROC) serves large cold storage warehouses ad other facilities with ammoia refrigeratio systems. Similar to SEM, the ROC Program is cohort-based ad icludes traiig ad o-site coachig to help osite staff to save eergy ad cotribute to the bottom lie i their plats while maitaiig productio, product quality ad safety. Traiig ad techical support is tailored to the uique cosideratios of ammoia-based refrigeratio plats. Promotio Strategy ad Icetives: Tacoma Public Utilities accout executives work closely with CEP egieerig staff to idetify ad recruit customers ito SEM programs. Promotio is typically targeted ad doe o a facility-by-facility basis. Icetives are based o operatios ad maiteace savigs below a baselie eergy model developed for each facility. The curret program re-projects their baselies every two years, ecouragig customers to fid ew savigs opportuities Plaed Chages: We are plaig to egage commercial customers by rollig out a Commercial Strategic Eergy Maagemet program. This program targets large commercial customers ad is expected to start i Risks: SEM programs rely o ogoig customer participatio to realize savigs. It is possible that participats may fail to egage employees i a maer that results i savigs, or drop out of SEM altogether. This has created sigificat volatility i past estimates of SEM performace. Basis of Aalysis: The program was aalyzed o a per kwh basis usig savigs estimates provided by Tacoma Power s C/I egieerig staff. Sice savigs are behavior based, they are ot tied to a specific ed use the same way other programs are aalyzed. Measure life is assumed to be five years with rapidly depreciatig savigs i years 3, 4 ad 5. SEM also uses O&M fuds which are paid at the ed of the year. Sice icetives ca be large, ad savigs estimates are somewhat volatile, this program ca create uique pressure o our O&M budget. Tacoma Power CONSERVATION PLAN 29

31 Equipmet Rebates COMMERCIAL / INDUSTRIAL PROGRAM Program Overview: 2% Tacoma Power has over 40,000 small ad medium size busiesses, each with diverse eeds. The Equipmet Rebates program serves these customers by offerig packages of measures grouped by busiess eed. Measures iclude (but are ot limited to): Egie block heaters Percetage of plaed eergy savigs from the C/I sector Heatig, vetilatio, ad air coditioig (HVAC) Office equipmet Food preparatio equipmet (steamers, oves, etc.) Grocery equipmet (display cases, refrigeratio upgrades, etc.) $269,900 Plaed Capital ad O&M expeditures $30.02 / MWh Plaed levelized costs 1.7 UCT B / C ratio 0.9 TRC B / C ratio How Customers Participate: Measures are packaged to alig busiess eed with delivery chael; cookig equipmet is promoted through cookig equipmet retailers, whereas HVAC equipmet is promoted through HVAC cotractors. Trade allies withi these delivery chaels provide educatio o efficiet equipmet ad promote our icetives. Customers purchasig equipmet that meets or exceeds our specificatios are eligible for a icetive amw Eergy savigs 30

32 Plaed Chages: Tacoma Power has participated i the Eergy Smart Grocer program sice Whe BPA eded the program i 2015, Tacoma Power partered with other Puget Soud utilities to cotiue the program through the ed of Whe the program eds, Tacoma Power will roll the grocery outreach effort ito the equipmet rebates program. I summer of 2017, Tacoma Power itroduced a umber of ew HVAC measures ad icreased icetives o curret offerigs. Tacoma Power expects icreased participatio by customers i respose to trade allies promotig the program. Risks: The Equipmet Rebates program is the smallest program i the C/I sector. While we are optimistic the combiatio of ew measures ad rollig the Eergy Smart Grocer program uder Equipmet Rebates umbrella will icrease participatio, it is ukow if customers ad trade allies will follow. Promotio Strategy ad Icetives: The equipmet rebates program pays fixed icetives without complex eergy calculatios. This strategy makes the program easy to implemet ad accessible to small ad medium sized busiesses. Additioally, the focus o offerig programs i the appropriate chael ecourages egagemet with small ad medium size busiess customers that lack resources to focus o eergy efficiecy. Basis of Aalysis: The equipmet rebates program was aalyzed by estimatig uit couts for the top seve types of equipmet rebate measures: egie block heaters, HVAC rooftop cotrols, heat pumps, food steamers, oves, grocery compressors, ad grocery display cases. Assumptios came from Tacoma Power s 2017 Coservatio Potetial Assessmet ad the BPA deemed measure list ad were reviewed by Tacoma Power s C/I egieerig staff. Uptake of grocery measures is expected to be limited due to the success of the prior Eergy Smart Grocer program, which reduced the remaiig potetial. Outreach could focus o past customers, as some istalled measures have exceeded their measure life. I these cases, the baselie for eergy calculatios will be existig equipmet. Tacoma Power CONSERVATION PLAN 31

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34 RESIDENTIAL PROGRAMS Tacoma Power offers a variety of eergy coservatio programs that help our residetial customers save moey ad keep their homes comfortable. Our residetial programs are orgaized by market chael: istaller ad retail. These chaels coect our programs to our customers. A additioal meas of deliverig our programs is directly to customers through promotio of efficiet products ad iformatio. Tacoma Power CONSERVATION PLAN 33

35 Retail RESIDENTIAL PROGRAM Program Overview: 69% Iteractig with customers at the time ad place of a purchase decisio is critical to ifluece buyig decisios. By leveragig our relatioships with retailers, maufacturers, ad distributors, we offer customers rebates at the poit of purchase. Rebated products iclude: Lightig (LED bulbs ad fixtures) Showerheads How Customers Participate: Percetage of plaed eergy savigs from the residetial sector $2,190,900 Plaed Capital ad O&M expeditures $22.49 / MWh Plaed levelized costs 2.2 UCT B / C ratio Customers visit a participatig retailer ad purchase products with our There s a Rebate for That bradig. Retailers discout products at the register, makig the experiece seamless for customers. There are o rebate forms to fill out ad mail i Plaed Chages: Light Emittig Diodes (LEDs) have officially displaced compact fluorescet lights (CFLs) i the residetial lightig market. We expect this tred to accelerate as more fixtures with itegrated LEDs eter the market ad displace traditioal fixtures with screw-i lamp sockets. 1.6 TRC B / C ratio 1.03 amw Eergy savigs 34

36 Promotio Strategy ad Icetives: Durig the 2018/19 bieium we are plaig to add several ew products to our retail program: heat pump water heaters ad smart thermostats. It is ukow at this time if reportig requiremets will prevet us from providig a istat rebate at the poit of sale for these items. However, we are explorig promotio of these products at retailers ad havig customers submit a olie or mail-i rebate applicatio, to allow us to gather reportig data ad expedite customer paymet. Risks: The Retail Program has bee our highest performig residetial program sice it was lauched i Lightig is the backboe of this program, accoutig for 99% of savigs. The success of this program, coupled with Federal regulatios that icreased light bulb efficiecy, has radically chaged the local lightig market. This chage has resulted i more efficiet products istalled i customer homes, resultig i higher baselies ad lower claimable savigs. Additioally, a ew Federal efficiecy stadard for lightbulbs is scheduled to take effect i Oce this stadard takes place, we aticipate claimable savigs will be below our cost effective threshold. The exact timig of this chage is ot clear, thus the impact o the Retail Program durig the 2018/19 bieium is ukow. We cotract with a third-party implemeter, Colehour + Cohe (C+C), to deliver the program to our customers. C+C provides field support, eters ito promotio agreemets with retailers, maufacturers, ad distributors o behalf of Tacoma Power, processes rebates, ad reports uits sold to CEP. Additioally, C+C assists CEP with the followig: Advisig o product icetive level Itroducig ew techologies Idetifyig participatig retail locatios Esurig products are o the shelf Maitaiig poit of purchase materials Traiig store sales staff, ad Plaig ad implemetig i-store evets. Basis of Aalysis: Idividual measures deemed by the RTF were modeled ito geeric lightig measures for the purpose of aalysis. Weightig of idividual measures started usig historical data ad was shaped by expected future outcomes. Assumptios were reviewed by Tacoma Power s residetial staff. Tacoma Power CONSERVATION PLAN 35

37 Weatherizatio ad Heatig Systems RESIDENTIAL PROGRAM Program Overview: 20% Improvig the efficiecy of a home s shell ad heatig system ot oly makes our customers more comfortable, but lowers their bills. Our program covers a wide rage of measures for customers i electrically heated homes, icludig: Attic, floor, ad wall isulatio Percetage of plaed eergy savigs from the residetial sector Air sealig ad pipe isulatio Widows Ductless ad cetral heat pumps Duct sealig Smart thermostats $1,488,400 Plaed Capital ad O&M expeditures $32.36 / MWh Plaed levelized costs 1.6 UCT B / C ratio 0.7 TRC B / C ratio How Customers Participate: Customers work directly with our weatherizatio ad heatig trade allies: widows ad isulatio cotractors, HVAC cotractors, ad duct sealig specialists, allied with our program. Trade allies kow our program requiremets ad ca advise what measures work best for each customer. Customers usig trade allies o our participatig cotractor list have the optio of assigig their icetive directly to the trade ally, reducig their out of pocket expeses amw Eergy savigs 36

38 Plaed Chages: I the marketplace, we observe customers are willig to pay higher out of pocket costs for measures with sigificat o-eergy beefits, such as heat pumps that icrease comfort. Adoptio of the UCT will allow CEP to leverage these beefits ad icrease the umber of weatherizatio ad heatig measures we offer egagig more customers ad acquirig more cost effective coservatio. To test this, CEP implemeted program chages i late 2017: 1. Rolled out ew cetral heat pump ad smart thermostat measures. 2. Lowered DHP icetives to alig with reduced savigs assumptios. The impact of these decisios will ot be realized util mid If customer participatio remais strog, we will apply these lessos to future program desigs. Risks: I our aalysis, may weatherizatio ad heatig system measures are oly margially cost effective. These measures are highly susceptible to chages i deemed savigs, with adjustmets of less tha 10% causig them to fail a TRC or UCT ecoomic scree. Although we participate i regioal discussios about deemed measure savigs, the ultimate decisio to chage savigs is made by the RTF. As metioed above we are experimetig with lowerig rebates. The goal is to reduce icetives to the lowest level possible ad still ifluece market adoptio treds. It is ukow how customers will respod to these rebate levels. Promotio Strategy ad Icetives: Weatherizatio rebates typically pay 60% of total project cost. I additio to rebates, we offer customers with good utility bill paymet history a seve year, zero iterest loa for most weatherizatio ad heatig systems measures. By combiig the rebate ad loa ad usig a participatig trade ally, most customers are able to complete their project with o upfrot out of pocket expese. Heatig rebates rage from $250 - $500, depedig o the measure. Basis of Aalysis: Weatherizatio measures were aalyzed by creatig a average house model. The model uses historic program accomplishmets to create a average house with a specified ft 2 value for each measure. Assumptios are further chaged by applyig a factor to weight HVAC type based o past program experiece. Other measures, such as DHPs ad smart thermostats, are weighted by past program experiece. Assumptios o future performace were reviewed by Tacoma Power s residetial staff. Tacoma Power CONSERVATION PLAN 37

39 Multifamily Commo Area RESIDENTIAL PROGRAM Program Overview: 7% Icreasig the eergy efficiecy i commo areas of multifamily buildigs is typically overlooked. Efficiecy upgrades ot oly reduce property ower operatig ad maiteace expeses, but improve teat quality of life ad safety through the use of improved equipmet. CEP supports improvemets to commo areas i multifamily buildigs, icludig: Lightig (LED bulbs ad fixtures) Custom projects (commo HVAC, pool pumps ad heaters, etc.) Percetage of plaed eergy savigs from the residetial sector $251,200 Plaed Capital ad O&M expeditures $23.78 / MWh Plaed levelized costs 2.1 UCT B / C ratio How Customers Participate: CEP multifamily staff help property owers avigate our program offers. Staff work closely with trade allies ad property owers to esure customers have a positive oe-stop shoppig experiece. Whe eeded, CEP s commercial egieers are egaged to estimate eergy savigs, esure projects meet Tacoma Power cost effective stadards, ad coduct moitorig ad verificatio (M&V) to assure eergy savigs are realized. 1.9 TRC B / C ratio 0.11 amw Eergy savigs 38

40 Plaed Chages: Sice we lauched our comprehesive Multifamily program i August 2014, trade allies have bee our biggest advocates. They geerate iterest ad brig projects to us. To icrease participatio we pla to collaborate with eighborhood ad commuity groups to idetify multifamily complexes with isufficiet lightig ad potetial for upgrades. Basis of Aalysis: The program was aalyzed o a per kwh basis usig three broad categories represetig typical ed uses: commo area lightig, HVAC equipmet, ad pumpig systems. Assumptios came from Tacoma Power s 2017 Coservatio Potetial Assessmet ad were reviewed by Tacoma Power s multifamily staff. Risks: Large multifamily projects ted to be very complex ad ivolve coordiatio with property owers, teats, ad trade allies over log periods of time. This ca result i log project delays, which leads to dwidlig iterest. To mitigate this, we assig a sigle poit of cotact from CEP to idetify all potetial eergy efficiecy improvemets ad the rebates available. This allows the ower to determie which measures they ca afford to do ow ad which eed to be budgeted for i comig years. Promotio Strategy ad Icetives: Icetives for lightig ad HVAC measures will cotiue to mirror their commercial couterparts; $0.17 per kwh for lightig savigs with a paymet cap of 60% of total project cost ad $0.23 per kwh for custom calculated measures (e.g. HVAC, pool heatig ad pumps, etc.), capped at 70% of project cost. Tacoma Power CONSERVATION PLAN 39

41 Water Heatig RESIDENTIAL PROGRAM Program Overview: 2% The water heatig market has dramatically chaged i the last five years with the itroductio of heat pump water heaters (HPWHs). The ewest models have sigificat improvemets to the techology ad performace tha earlier products ad promise to deliver sigificat eergy savigs without sacrificig customer comfort ad coveiece. To itroduce these products, CEP will lauch a ew water heatig program i 2018, begiig with a pilot. Products will iclude: All Tier 2 ad Tier 3 heat pump water heaters Percetage of plaed eergy savigs from the residetial sector $147,100 Plaed Capital ad O&M expeditures $45.66 / MWh Plaed levelized costs 1.1 UCT B / C ratio How Customers Participate: The 2018 pilot will allow customers to purchase a HPWH through our trade allies or directly from a retailer. If the pilot is successful, it will guide how we deliver the program whe it goes to scale i Plaed Chages: Our water heatig program is ew for We ll lauch it usig a adaptive maagemet strategy, ad aticipate program chages durig the 2018/19 time period based o customer feedback ad market coditios. 0.9 TRC B / C ratio 0.03 amw Eergy savigs 40

42 Risks: Heat pump water heaters have several uique customer acceptace barriers. The heat pump creates cold air durig operatio that is cycled ito the livig space (uless ducted to the outside), ad compared to a stadard electric water heater, the uits produce low-level oise ad vibratio which could impact customer satisfactio. Additioally, we aticipate cocers over hot water recovery time ad willigess of customers to iteract with water heater cotrols. Basis of Aalysis: The program was aalyzed usig RTF s deemed measure for Tier 2 HPWHs replacig ay size water heater i ay locatio. 2018/19 goals were reviewed by Tacoma Power s residetial staff. Fially, HPWH s are taller tha traditioal electric water heaters. It may be challegig to fit the larger uits i older homes. With almost 25% of homes i our service territory built before 1940, ad over 65% of homes built before 1980, there is cocer that replacig a electric resistace water heater with a HPWH will preset a challege with regards to to available space. Promotio Strategy ad Icetives: We are explorig several promotio optios for 2018, icludig direct mail outreach to et meterig customers ad past program participats. These customers are much more likely to be early adopters ad try somethig ew. Iitial icetives will be set at $500 per HPWH. We will adjust icetives based o lessos leared durig the pilot. Tacoma Power CONSERVATION PLAN 41

43 Product Promotio RESIDENTIAL PROGRAM Program Overview: 1% Customers ejoy gettig free efficiet products from Tacoma Power. This program builds cosiderable good will with our customers, allows skeptical customers to sample efficiet products, ad provides eergy savigs that yield fiacial beefits. Products typically distributed iclude: Lightig (LED bulbs ad fixtures) Showerheads How Customers Participate: Percetage of plaed eergy savigs from the residetial sector $82,200 Plaed Capital ad O&M expeditures $46.92 / MWh Plaed levelized costs Customers primarily iteract with our staff at local commuity evets ad at the Eergy Savigs couter i the TPU lobby. Additioally, customers may receive products through direct mail outreach or through our parterships with low-icome agecies ad commuity advocates. These efforts eable us to distribute products to our hard to reach customers. 1.1 UCT B / C ratio 1.9 TRC B / C ratio 0.02 amw Eergy savigs 42

44 Plaed Chages: The program will cotiue to focus o customer iteractio ad egagemet at local commuity evets ad i the TPU lobby. This tred cotiues a shift away from direct mail outreach that bega i As a result, fewer products will be distributed tha i past bieia. Risks: Distributio is a low risk activity for the utility. The cost of products is relatively iexpesive ad justified by the savigs accrued whe customers use the products. Promotio Strategy ad Icetives: Products will cotiue to be distributed to customers at o charge at local commuity evets, i the TPU lobby, by utility cotractor, ad through commuity parters. Basis of Aalysis: Idividual measures from the most recet RTF aalysis represetig estimated 2018/19 program activity were aalyzed. Our residetial coservatio staff reviewed program performace estimates to esure they were appropriate. Tacoma Power CONSERVATION PLAN 43

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46 LOW-INCOME / HARD-to-REACH Tacoma Power is proud to be a regioal leader i servig low-icome ad hard to reach customers. To help those most i eed, icetives will be above those offered i our stadard heatig ad weatherizatio program. Our targeted offers help low-icome customers livig i their ow homes, reters i sigle family homes, reters i two, three, ad four plexes, large multifamily complexes, ad those livig i maufactured homes. Tacoma Power CONSERVATION PLAN 45

47 Maufactured Home Direct Istall LOW-INCOME / HARD-TO-REACH Program Overview: 48% Percetage of plaed eergy savigs from the low-icome / hard-to-reach sector $1,152,600 Plaed Capital ad O&M expeditures $46.25 / MWh Plaed levelized costs Outside of duct sealig, maufactured homes have historically bee difficult to serve with coservatio programs for a variety of reasos: owers are typically low-icome, maufactured homes have complicated owership arragemets, ad a limited availability of traditioal cost effective measures. To address these challeges, we have assembled a package of measures that are cost effective whe istalled o a large scale. This model works well i maufactured home parks where most homes are of similar vitage ad i close proximity. Measures iclude: Ductless Heat Pumps (DHPs) LED Lightig Showerheads Pipe Isulatio Duct Sealig 1.1 UCT B / C ratio 1.2 TRC B / C ratio 0.21 amw Eergy savigs 46

48 How Customers Participate: Trade allies work with park maagemet to idetify parks that would beefit from this program. Parks are submitted to us for review ad approval. The trade ally the works with park maagemet to cotact home owers. Home owers cotract with the trade ally for istallatio ad assig the grat to the trade ally, resultig i o out of pocket cost to the home ower. Trade allies are also resposible for implemetig a pre-istallatio home ower survey ad providig educatio o how to most efficietly use a DHP. Promotio Strategy ad Icetives: Icetives are set to cover 100% of expected cost. The program will be promoted by trade allies, word of mouth, ad direct outreach to maufactured home park maagers. Basis of Aalysis: Uits are aalyzed usig savigs assumptios from the RTF Plaed Chages: Upo successful completio ad evaluatio of our 2017 maufactured home pilot, we will lauch a full scale program i It will be lauched usig a adaptive maagemet strategy. We expect to make program chages durig the 2018/19 time period based o customer feedback ad market coditios. Risks: The program relies o leveragig ecoomies of scale to reduce DHP costs. If cotractors are uable to meet expected cost thresholds, the program will be uable to cover 100% of the DHP cost. Uder this sceario, uptake will be sigificatly lower tha plaed. Tacoma Power CONSERVATION PLAN 47

49 Retal Housig LOW-INCOME / HARD-TO-REACH Program Overview: 24% Retal housig suffers from a uique split icetive. Property owers do ot pay the electric bill, ad therefore ot motivated to make eergy improvemets, Teats do ot ow the property ad so are ot iterested i makig eergy improvemets. Our retal housig weatherizatio ad heatig program attempts to bridge this gap by offerig compellig icetives without icome certificatio paperwork or restrictive participatio guidelies. Measures iclude: Percetage of plaed eergy savigs from the low-icome / hard-to-reach sector $1,109,100 Plaed Capital ad O&M expeditures $52.58 / MWh Plaed levelized costs 1.0 UCT B / C ratio 0.9 TRC B / C ratio 0.10 amw Eergy savigs Attic, floor, ad wall isulatio Air sealig ad pipe isulatio Widows Ductless Heat Pumps Cetral Heat Pumps 48

50 How Customers Participate: Property owers work directly with our weatherizatio ad heatig trade allies: widows ad isulatio cotractors, HVAC cotractors, ad duct sealig specialists allied with our program. The program piggybacks o our existig sigle family ad multifamily weatherizatio programs, makig the process seamless for the customer ad reducig delivery costs Plaed Chages: This program offer is ew for We ll make icremetal program chages durig the 2018/19 time period based o customer feedback ad market coditios. Risks: While the program has bee redesiged with property ower feedback, it is ukow if property owers will be willig to cotribute to the cost of widow istallatio or ductless/cetral heat pumps. Promotio Strategy ad Icetives: Weatherizatio rebates typically pay 100% of total project cost, with widow rebates payig betwee 50% ad 25% of project cost. I additio to rebates, we offer property owers with qualifyig credit a seve year, zero iterest loa. By combiig the rebate ad loa, ad usig a participatig trade ally, most property owers are able to complete their project with o out of pocket upfrot cost. Basis of Aalysis: Weatherizatio measures were aalyzed by creatig a average house model. The model uses historic program accomplishmets to create a average house with a specified ft2 value for each measure. Assumptios o future performace were reviewed by Tacoma Power s residetial staff. Tacoma Power CONSERVATION PLAN 49

51 Sigle Family Weatherizatio LOW-INCOME / HARD-TO-REACH Program Overview: 20% Improvig a home s shell ad heatig system ot oly makes customers more comfortable, but lowers their bills. Our program provides grats to cover 100% of the cost for the followig measures: Attic, floor, ad wall isulatio Air sealig ad pipe isulatio Sigle Pae Widows How Customers Participate: Percetage of plaed eergy savigs from the low-icome / hard-to-reach sector $1,071,900 Plaed Capital ad O&M expeditures $56.39 / MWh Plaed levelized costs Customers must meet program icome guidelies to be eligible for coservatio grats. Qualifyig customers cotact trade allies who provide bids o weatherizatio projects. The trade ally walks the customer through the applicatio process, assistig them with required project documetatio ad icome verificatio. After staff approval of the project, the trade ally deducts the grat from the customer s ivoice, resultig i o out of pocket expese for the customer. 1.0 UCT B / C ratio 1.1 TRC B / C ratio 0.09 amw Eergy savigs 50

52 Plaed Chages: We are removig ductless heat pumps (DHPs) from our sigle family low-icome program begiig i The RTF has coducted several studies that idicate savigs for DHPs are much lower tha expected. As a result, this measure is o loger cost effective uder a TRC or UCT cost effective scree. Basis of Aalysis: Weatherizatio measures were aalyzed by creatig a average house model. The model uses historic program accomplishmets to create a average house with a specified ft2 value for each measure. Assumptios o future performace were reviewed by Tacoma Power s residetial staff. Risks: We have see a sigificat declie i low-icome weatherizatio projects over the time period. We attribute this declie to program chages made i 2016 that removed double pae widows from our low-icome program offer ad left fewer projects i our coservatio potetial. We will cotiue to look for creative icetive optios, program desig, ad parterships to promote our low-icome programs to qualifyig customers. Promotio Strategy ad Icetives: The program is promoted via cotractors ad referrals from commuity parters. Our grats pay 100% of the project cost for qualifyig customers. I order to qualify, customers must meet icome eligibility guidelies determied by household size ad icome. We allow customers to assig the grat to the cotractor, eablig them to get their homes weatherized with o out of pocket costs. Tacoma Power CONSERVATION PLAN 51

53 Multifamily Weatherizatio LOW-INCOME / HARD-TO-REACH Program Overview: 8% Apartmets suffer from the same split icetive as retal housig. Property owers do ot pay the electric bill, ad therefore are ot motivated to make eergy improvemets. Teats do ot ow the property so are ot iterested i makig eergy improvemets. Our apartmet weatherizatio program attempts to bridge this gap by offerig compellig icetives without icome certificatio paperwork or restrictive participatio guidelies. Measures iclude: Attic, floor, ad wall isulatio Percetage of plaed eergy savigs from the low-icome / hard-to-reach sector $323,500 Plaed Capital ad O&M expeditures $47.71 / MWh Plaed levelized costs 1.1 UCT B / C ratio Air sealig ad pipe isulatio Widows How Customers Participate: Property owers work directly with our weatherizatio trade allies: widows ad isulatio cotractors, allied with our program. The program piggybacks o our existig sigle family ad multifamily weatherizatio programs, makig the process seamless for the customer ad reducig delivery costs. 0.5 TRC B / C ratio 0.03 amw Eergy savigs 52

54 Plaed Chages: We will add icetives for replacig sigle pae widows back ito the program for 2018/19. Risks: While the program has bee redesiged with property ower feedback, it is ukow if property owers will be willig to cotribute to the cost of widow istallatio. Promotio Strategy ad Icetives: Weatherizatio rebates typically pay 100% of total project cost, with widow rebates payig betwee 50% ad 25% of project cost. I additio to rebates, we offer property owers with good credit a seve year, zero iterest loa. Basis of Aalysis: Weatherizatio measures were aalyzed by creatig a average house model. The model uses historic program accomplishmets to create a average house with a specified ft2 value for each measure. Assumptios o future performace were reviewed by Tacoma Power s residetial staff. Tacoma Power CONSERVATION PLAN 53

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56 EXTERNAL ENERGY CONSERVATION Tacoma Power parters with other orgaizatios to deliver eergy efficiecy outside our traditioal coservatio programs. These programs are typically implemeted by other orgaizatios, but we cotribute fudig or techical expertise ad are allowed to claim savigs. Exteral Eergy Coservatio represets our lowest cost eergy resources, but lacks egagemet opportuities our customers. Tacoma Power CONSERVATION PLAN 55

57 Northwest Eergy Efficiecy Alliace NON-CRM PROGRAM Program Overview: We parter with other Northwest utilities to fud the Northwest Eergy Efficiecy Alliace (NEEA). NEEA helps Tacoma Power save eergy two ways: NEEA fills the eergy efficiecy pipelie with ew products, services, practices, ad approaches at the regioal level. Through these efforts, NEEA ecourages upstream market actors to brig ew eergy efficiet products to market, givig cosumers ew efficiet optios. Past efforts have icluded frot loader washig machies ad ductless heat pumps. NEEA helps foster regioal market solutios that accelerate ad sustai adoptio of emergig eergy efficiecy products, services, ad practices. By workig upstream i the market ad ecouragig purchase of efficiet products, NEEA helps provide customers with more efficiet products. Past efforts iclude workig with retailers to ecourage stockig practices that make efficiet televisios the default choice. Risks: NEEA savigs may vary sigificatly due to chages i reportig baselie. Basis of Aalysis: NEEA savigs estimates ad performace are based o 50% of NEEA estimates to accout for ukow baselie variability. $1,001,600 Plaed Capitol ad O&M expeditures / MWh Plaed levelized costs 1.7 UCT B / C ratio 0.8 TRC B / C ratio 0.45 amw Eergy savigs Promotio Strategy ad Icetives: CEP works very closely with NEEA ad is represeted o its Board of Directors, Regioal Portfolio Advisory Committee, ad Sector Advisory Committees. Participatio esures our eeds ad perspectives are represeted. Additioally, we directly fud NEEA s work with retailers, distributors, maufacturers, ad atioal orgaizatios that facilitate eergy efficiecy. 24% Percetage of plaed eergy savigs from exteral eergy coservatio 56

58 City of Tacoma Street Lightig Tacoma Power Voltage Optimizatio NON-CRM PROGRAM NON-CRM PROGRAM Program Overview: We are parterig with the City of Tacoma to upgrade Tacoma s streetlights to LEDs. The program is a fiacial wi-wi, with Tacoma Power purchasig the ew LED street lights ad recoverig costs through a special street lightig rate. The City of Tacoma will pay less i power ad maiteace costs. We are also providig techical expertise ad project maagemet support to help expedite the project. Basis of Aalysis: Savigs were estimated by C/I staff usig a lightig power desity calculatio. Costs are estimated based o the cost of moey for the 15 year term of the project. Program Overview: We parter with Tacoma Power s trasmissio ad distributio group to acquire savigs from voltage optimizatio where we systematically optimize voltage at the substatio level to reduce lie loss. This effort is part of a ogoig effort to maximize efficiecy of our distributio system. Basis of Aalysis: Savigs estimates are based o savigs from past voltage optimizatio projects amw Eergy savigs 0.34 amw Eergy savigs 58% 18% Percetage of plaed eergy savigs from exteral eergy coservatio Percetage of plaed eergy savigs from exteral eergy coservatio Tacoma Power CONSERVATION PLAN 57

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61 MyTPU.org / Rebates