STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES CASE SUMMARY, PETITION AND TESTIMONY

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2 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF : SOUTH JERSEY GAS COMPANY TO : CONTINUE ITS ENERGY EFFICIENCY : BPU DOCKET NO. PROGRAMS ( EEP IV ) AND ENERGY : EFFICIENCY TRACKER PURSUANT TO : N.J.S.A. 48: : CASE SUMMARY, PETITION AND TESTIMONY March 2018

3 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF SOUTH JERSEY GAS COMPANY TO CONTINUE ITS ENERGY EFFICIENCY PROGRAMS ( EEP IV ) AND ENERGY EFFICIENCY TRACKER PURSUANT TO N.J.S.A. 48: : : : : : CASE SUMMARY BPU DOCKET NO. South Jersey Gas Company ( South Jersey or Company ) files this Petition with the Board of Public Utilities ( Board ) seeking authorization to continue its Energy Efficiency Programs ( EEPs ) and associated cost recovery mechanism, the Energy Efficiency Tracker ( EET ), pursuant to N.J.S.A. 48: The Board first authorized South Jersey to offer EEPs, and to implement the EET, in July South Jersey s current suite of EEPs is comprised of the Residential Home Performance and Finance Energy Efficiency Program, the Non-Residential Energy Efficiency Investment Program, the Enhanced Residential HVAC Rebate Program, the Commercial Customer Direct Install Financing Program, and the Social Marketing and Education Program (OPOWER). These programs were designed to complement and supplement the offerings of the New Jersey Clean Energy Program, encourage customers to reduce their overall energy usage and create jobs. With this Petition, South Jersey is seeking to continue offering its currently operating EEPs, with modifications, and to implement new programs for a five-year period commencing upon Board approval and with an overall budget of approximately $195 million. The new proposed programs include: (1) the Residential Efficient Products Program; (2) the Residential Home Assessment with Direct Install Program; (3) the Residential Retrofit Weatherization Program; (4) the C&I Engineered Solutions Program; (5) the Education Program; and (6) the Emerging Technologies & Approaches Program. South Jersey is also seeking authorization to 1

4 recover all costs associated with the EEPs and that it be permitted to earn a return on and of investments associated with these programs through its EET, set forth in Rider N of the Company s Tariff. These programs will provide participating customers with increased incentives to reduce their natural gas consumption, will support and complement the objectives of the New Jersey Clean Energy Program and the New Jersey Energy Master Plan, and will create jobs. If approved by the Board, the impact of the proposed EEPs on the bill of a residential heating customer using 100 therms during a winter month would be an increase of $1.15, or 0.8%. 2

5 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF SOUTH JERSEY GAS COMPANY TO CONTINUE ITS ENERGY EFFICIENCY PROGRAMS ( EEP IV ) AND ENERGY EFFICIENCY TRACKER PURSUANT TO N.J.S.A. 48: : : : : : PETITION BPU DOCKET NO. TO THE HONORABLE BOARD OF PUBLIC UTILITIES: Petitioner, South Jersey Gas Company ( South Jersey or Company ), a public utility corporation of the State of New Jersey, with its principal office at One South Jersey Plaza, Folsom, New Jersey, hereby petitions the Board of Public Utilities ( Board ) for authorization to continue its Board approved Energy Efficiency Programs ( EEPs ) and associated cost recovery mechanism, the Energy Efficiency Tracker ( EET ), pursuant to N.J.S.A. 48:3-98.1, and in support thereof, states as follows: I. INTRODUCTION 1. South Jersey is a corporation duly organized under the laws of the State of New Jersey and is a public utility engaged in the transmission, distribution, transportation, and sale of natural gas within its defined service territory within the State of New Jersey. Said service territory includes all or portions of the following counties: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester and Salem. Within its service territory, South Jersey serves approximately 383,000 customers. 2. South Jersey is subject to regulation by the Board for the purposes of ensuring safe, adequate and proper natural gas service pursuant to N.J.S.A. 48: Through this Petition and the accompanying Direct Testimony and Schedules, South Jersey seeks Board approval to continue its current EEP III Extension Program offerings,

6 with modifications, and implement new EEPs for a five-year period commencing on issuance of a Board Order, with a total budget of approximately $195 million ( EEP IV or Program ). South Jersey also seeks approval to recover costs associated with the EEPs described herein through the existing EET. 4. The objective of this proposal is to continue supporting and complementing the objectives and goals of the New Jersey Clean Energy Program ( NJCEP ) by promoting energy efficiency, providing additional funding for already successful programs, and developing new programs to allow for greater customer participation, as well as to support the goals of the New Jersey Energy Master Plan by reducing energy consumption, producing environmental benefits, and creating green jobs. II. BACKGROUND 5. N.J.S.A. 48: authorizes an electric or natural gas utility to provide and invest in energy efficiency and conservation programs in its service territory on a regulated basis and provides that the electric or natural gas utility may seek cost recovery for any such programs by filing a petition with the Board. 6. On May 12, 2008, the Board issued an Order (the May 2008 Order ) establishing the procedures by which electric and natural gas utilities can seek approval of energy efficiency and conservation programs on a regulated basis, as authorized by N.J.S.A. 48: The May 2008 Order also set forth certain Minimum Filing Requirements ( MFRs ) to be included with any such filings with the Board. 7. On January 26, 2009, South Jersey filed a petition with the Board in Docket Numbers EO and GO seeking approval to develop and implement several 2

7 EEPs that were to be made available to South Jersey customers over a two-year period in order to promote energy efficiency and conservation while stimulating the State s economy. 8. At the same time, the Company sought Board approval for an associated cost recovery rider mechanism, the EET. 9. The EEPs were designed to complement and supplement the then existing offerings of the New Jersey Clean Energy Program and the Company s Conservation Incentive Program ( CIP ), in an attempt to encourage higher levels of participation in energy efficiency programs in South Jersey s service territory. 10. Consistent with the focus of N.J.S.A. 26:2C-45 ( Regional Greenhouse Gas Initiative Legislation or RGGI Legislation ), the then existing New Jersey Energy Master Plan and the Governor s economic stimulus goals, the EEPs proposed by South Jersey were geared toward encouraging customers to reduce their overall energy usage. The EEPs also had the beneficial effect of creating additional jobs in the energy efficiency market. 11. In an Order dated July 24, 2009 in Docket No. GO (the July 2009 Order ), the Board adopted the terms of a Stipulation entered into among South Jersey, Board Staff, and the Division of Rate Counsel ( Rate Counsel ) (collectively, the Parties ), approving the EEPs and the EET for the recovery of costs incurred by South Jersey. 12. Pursuant to the July 2009 Order, the Company was authorized to recover all revenue requirements associated with the EEPs. Cost recovery was through creation of the EET, which consisted of two parts. The first part of the EET allowed the Company to earn a return on the investment and recover the amortization of the regulatory asset ( RA ) to be created upon South Jersey s balance sheet. The second part of the EET allowed the Company to recover incremental operating and maintenance ( O&M ) expenses associated with the EEPs. 3

8 13. On May 3, 2012, South Jersey filed a second petition in Docket No. GO seeking to continue its approved EEPs, with certain modifications, and to implement new EEPs. 14. On June 21, 2013 in Docket No. GO , the Board issued an Order (the June 2013 Order ) authorizing South Jersey to offer four EEPs through June 2015 with an authorized budget of $24 million (the EEP II Extension Program ), which included: (1) the Residential Home Performance and Finance Energy Efficiency Program; (2) the Non-Residential Energy Efficiency Investment Program; (3) the Enhanced Residential HVAC Rebate Program; and (4) the Commercial Customer Direct Install Financing Program. The June 2013 Order also authorized South Jersey to continue its EET to recover all prudently incurred costs associated with the EEPs. 15. On January 20, 2015, South Jersey filed a third petition with the Board in Docket No. GR , seeking approval to further extend the approved EEPs, with certain modifications, and to implement a new EEP. 16. On August 19, 2015 in Docket No. GR , the Board issued an Order (the August 2015 Order) authorizing South Jersey to continue its Residential Home Performance and Finance Energy Efficiency Program, Non-Residential Energy Efficiency Investment Program, Enhanced Residential HVAC Rebate Program, and Commercial Customer Direct Install Financing Program through August 2017 with an authorized budget of $36.3 million (the EEP III Extension Program ). The August 2015 Order also authorized South Jersey to implement the Social Marketing and Education Program (OPOWER), as well as to continue its EET to recover all prudently incurred costs associated with the EEPs. 17. On January 25, 2017 (the January 2017 Order), the Board approved an extended term of the current EEP III Extension Program to December 31, 2018, with no additional funding. 4

9 III. PROGRAM DESCRIPTION 18. Pursuant to the January 2017 Order, the Company s authorization to implement its EEPs will expire by December 31, As such, South Jersey proposes to commence the EEPs described herein upon Board approval in this proceeding, in order to facilitate continued customer interest and to provide greater certainty to contractors providing energy efficiency services in South Jersey s territory. 19. South Jersey proposes to continue implementing its existing EEPs, with certain modifications, hereinafter renamed and referred to collectively as the following: (1) the NJCEP Residential Loans/Rebates Program; (2) the NJCEP Commercial Loans Program; and (3) the Residential Behavior Program. 20. South Jersey also requests approval to implement new EEPs to attract and engage both residential and commercial customers. The proposed EEPs include: (1) the Residential Efficient Products Program; (2) the Residential Home Assessment with Direct Install Program; (3) the Residential Retrofit Weatherization Program; (4) the C&I Engineered Solutions Program; (5) the Education Program; and (6) the Emerging Technologies & Approaches Program. 21. A detailed description of each of the EEPs identified above is included in the Direct Testimony of Bruce S. Grossman, Program Manager, Residential Energy Efficiency included with this filing. 22. Also included herewith is the Direct Testimony of Isaac Gabel-Frank of Gabel Associates. Mr. Gabel-Frank s Cost Benefit Analysis ( CBA ) summarized in and supported by his Direct Testimony demonstrates the quantified beneficial nature of the Company s proposal. Mr. Gabel s testimony also identifies non-quantifiable benefits to the State associated with all of the Company s proposed EEPs, which are over and above the CBA. 5

10 IV. PROGRAM INVESTMENTS 23. South Jersey proposes a total program investment level of approximately $166.7 million over a five-year period and an administrative cost allowance of approximately $28.7 million. The administrative costs, also referred to as O&M expenses, primarily consist of administration, marketing and sales, training, inspections and quality control, and evaluation costs to support the delivery of the EEPs. 24. The proposed program cost allocation between investment and O&M expenses is summarized below: EEP Budget ($ Millions) Program Investment Residential Programs $134.1 Commercial Programs $22.8 Other Programs $9.8 Total Program Investment $166.7 Operations and Maintenance Administration, Marketing & Sales, Training, Inspections & Quality Control, and Evaluation $28.7 Total Investment and O&M $ Based on market conditions and the level of market response to each EEP, South Jersey also proposes that it be permitted the flexibility to transfer funding between EEPs after the initial year of the EEP IV program, in order to maximize energy savings and program resources. V. COST RECOVERY 26. South Jersey requests approval to continue the existing EET rate mechanism to recover costs associated with the EEPs. As previously approved, the cost recovery will consist of two parts. One part will allow the Company to earn a return on the investment and recover 6

11 the amortization of the regulatory asset. The second part of the EET will recover incremental O&M expenses associated with the EEPs. 27. South Jersey shall earn a return on its net investment based upon an authorized return on equity ( ROE ) and capital structure including income tax effects. The weighted average cost of capital ( WACC ) utilized to calculate the return on the unamortized portion of the program investments and to set rates will be 6.80% (8.77% on a pre-tax basis), which is the WACC utilized to set rates in the Company s most recent base rate case in Docket No. GR , updated for subsequent tax reform changes. 28. The Company proposes to amortize its investments over a sixteen-year period to better align with the useful life of the measures installed for the proposed EEPs. 29. The cost recovery mechanism and revenue requirements associated with the EEPs are discussed in more detail in the Direct Testimony of Stefany M. Graham, Manager, Rates and Regulatory Initiatives. 30. South Jersey requests that the initial revenue requirement for the EEPs and an associated EET rate commence during the month in which the EEPs and associated EET are approved by the Board based on projected expenditures for the EEPs. 31. Based on the foregoing, and the information provided in the attached Direct Testimony and supporting Schedules, South Jersey proposes an initial EET rate associated with the proposed EEPs of $ per therm, including taxes. This represents an increase of $ per therm to the current EET rate of $ per therm, for a total combined EET rate of $ per therm. 7

12 32. As a result of these proposed rates, the bill impact for a typical residential heating customer using 100 therms during a winter month will be an increase of $1.15, or 0.8%, effective on Board approval. 33. Consistent with its currently approved EEPs and EET cost recovery mechanism, South Jersey will continue to file with the Board, on an annual basis, a petition seeking to establish future EET rates and to adjust its EET rates to reflect over and under recoveries. VI. PROCEDURAL MATTERS AND DIRECT TESTIMONY 34. The May 2008 Order required that a utility must meet with Board Staff and the Division of Rate Counsel at least 30 days prior to filing a petition requesting approval of EEPs to discuss the nature of the program and program cost recovery mechanism to be proposed. 35. Accordingly, South Jersey met with representatives of Board Staff and the Division of Rate Counsel on February 14, 2018 and provided an overview of the relief sought in this Petition, including a description of the proposed EEPs and the proposed cost recovery mechanism. 36. A draft Notice of Filing and of Public Hearing is attached hereto as Exhibit A. 37. A Schedule of MFR s and their location in the Company s filing is attached hereto as Exhibit B. 38. Also attached to this Petition, in support of the requests made herein, are the following Direct Testimony: Exhibit C: Direct Testimony of Bruce S. Grossman, Program Manager, Energy Efficiency for South Jersey; Exhibit D: Direct Testimony of Stefany M. Graham, Manager, Rates and Regulatory Initiatives for South Jersey; and 8

13 Exhibit E: Direct Testimony of Isaac Gabel-Frank, Vice President, Gabel Associates. 39. South Jersey has served notice and five (5) copies of this Petition upon the Division of Rate Counsel, 140 East Front Street, 4 th Floor, PO Box 003, Trenton, New Jersey South Jersey has also served notice and two (2) copies of this Petition upon the Department of Law and Public Safety, Division of Law, 124 Halsey Street, PO Box 45029, Newark, New Jersey VII. CONCLUSION AND REQUEST FOR APPROVAL For the foregoing reasons, as supported by the Direct Testimony attached to this Petition, South Jersey respectfully requests that the Board issue an Order as follows: 1. Finding that the EEPs are in the public interest and authorizing South Jersey to implement and administer the EEPs under the terms set forth in this Petition and accompanying Exhibits, for a five-year period commencing upon Board approval; 2. Authorizing the use of deferred accounting and the recovery of the costs associated with the EEPs through the EET (Rider N of the Company s Tariff); 3. Approving South Jersey s request for an increase to its EET rate of $ per therm until the Company submits its next annual EET filing or the Board issues an Order changing such rates; and 4. Granting such other relief as the Board deems just, reasonable and necessary. 9

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16 EXHIBIT A NOTICE OF FILING OF PETITION AND OF PUBLIC HEARING IN THE MATTER OF THE PETITION OF SOUTH JERSEY GAS COMPANY FOR APPROVAL TO CONTINUE ITS ENERGY EFFICIENCY PROGRAMS ( EEP IV ) AND ENERGY EFFICIENCY TRACKER PURSUANT TO N.J.S.A. 48: B.P.U. DOCKET NO. NOTICE IS HEREBY GIVEN that on March 27, 2018, pursuant to N.J.S.A. 48:3-98.1, South Jersey Gas Company ( South Jersey ) filed a Petition with the Board of Public Utilities ( Board ) seeking authorization to continue offering Energy Efficiency Programs and to continue its Energy Efficiency Tracker ( EET ). South Jersey requested that the Board permit South Jersey to continue offering its existing programs, with modifications, and to implement new programs for a five-year period commencing at the date of Board approval. The proposed programs include: (1) the NJCEP Residential Loans/Rebates Program; (2) the NJCEP Commercial Loans Program; (3) the Residential Behavior Program; (4) the Residential Efficient Products Program; (5) the Residential Home Assessment with Direct Install Program; (6) the Residential Retrofit Weatherization Program; (7) the C&I Engineered Solutions Program; (8) the Education Program; and (9) the Emerging Technologies & Approaches Program. South Jersey has also requested that the Board permit South Jersey to recover all costs associated with its Energy Efficiency Programs, and that it be permitted to earn a return on and a return of investments associated with these programs, through its EET. These programs will provide participating customers with increased incentives to conserve energy and reduce their natural gas consumption. South Jersey proposes to recover the costs, and an authorized return, associated with the proposed Energy Efficiency Programs through a cost recovery mechanism which will operate in a manner consistent with existing Board-approved mechanisms. The proposed EET Charge associated with the proposed Energy Efficiency Programs would be applied to all customer classes. If approved by the Board, the impact of the proposed programs on the EET Charge for a typical Residential Heating customer and those General Service customers using less than 5,000 therms per year would be: Residential Heating Service (RSG) Therm Level Bill as of February 10, 2018 (1) Proposed Bill (2) Dollar Increase Percent Increase 25 $43.07 $43.36 $ % 100 $ $ $ % 200 $ $ $ % General Service (GSG) (Using less than 5,000 therms per year) Therm Level Bill as of February 10, 2018 (1) Proposed Bill (2)) Dollar Increase Percent Increase 500 $ $ $ % 1,000 $1, $1, $ % 2,000 $2, $2, $ % (1) Based upon current Delivery Rates and Basic Gas Supply Service (BGSS) charges in effect October 1, 2017 and assumes that the customer receives BGSS service from South Jersey Gas. (2) Same as (1) except includes change in EET.

17 EXHIBIT A Pursuant to statute, the Board has the authority to approve South Jersey s Petition in a manner that it finds just and reasonable. Therefore, the Board may authorize Energy Efficiency Programs different than those proposed by South Jersey and may authorize an EET Charge different from that proposed by South Jersey. Copies of the Company s filing are available for inspection at the Company offices located at One South Jersey Plaza, Folsom, New Jersey 08037, or at the Board of Public Utilities, 44 South Clinton Avenue, Trenton, New Jersey The Company s filing is also located on the Company website at Information.aspx. NOTICE is further given that public hearings have been scheduled at the following date, times, and place on the Company s above-mentioned requests. at 4:30 and 5:30 PM Voorhees Township, Municipal Court 2400 Voorhees Town Center Voorhees, New Jersey (located directly across from Township Library at 203 Laurel Road) The public is invited to attend and make a statement of their views on the proposed increases. Such comments will be made a part of the final record. In order to encourage full participation in this opportunity for public comment, please submit any requests for needed accommodations, including interpreter, listening devices or mobility assistance, forty-eight (48) hours prior to these hearings. Written requests and public comments may be submitted to the Board addressed to: Aida Camacho, Secretary, Board of Public Utilities, 44 South Clinton Avenue, P.O. Box 350, Trenton, New Jersey SOUTH JERSEY GAS COMPANY By: David Robbins, Jr. President

18 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: LOCATION IN FILING I. General Filing Requirements a. The utility shall provide with all filings, information and data pertaining to the specific program proposed, as set forth in applicable sections of N.J.A.C. 14: and N.J.A.C. 14: b. All filings shall contain information and financial statements for the proposed program in accordance with the applicable Uniform System of Accounts that is set forth in N.J.A.C. 14: The utility shall provide the Accounts and Account numbers that will be utilized in booking the revenues, costs, expenses and assets pertaining to each proposed program so that they can be properly separated and allocated from other regulated and/or other programs. c. The utility shall provide supporting explanations, assumptions, calculations, and work papers for each proposed program and cost recovery mechanism petition filed under N.J.S.A. 48:3-98.1, including the rationale for selecting the approach included in its proposed program(s), and for all qualitative and quantitative analyses therein. The utility shall provide electronic copies of all materials and supporting schedules, with all inputs and formulae intact. SMG-5 - Comparative Balance Sheet SMG-6 - Comparative Income Statement SMG-7 - Balance Sheet at December 2017 SMG-8 - Statement of Revenue at December 2017 SMG-9 - Utility Payments or Accruals to Affiliates SMG-11 - Pro Forma Income Statement and Balance Sheet SMG-13 - Proposed Tariff Sheets Exhibit A - Form of Public Notice SMG-10 - Accounts and Account Numbers SMG-11 - Pro Forma Income Statement and Balance Sheet Exhibit D - Direct Testimony of Stefany M. Graham SMG-1 - Annual Revenue Requirements SMG-2 - Weighted Average Cost of Capital SMG-3 - Revenue Factor Derivation Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions BSG-3 - Program Expenditures Electronic schedules supporting the cost benefit analysis will be provided upon execution of a Non-Disclosure Agreement agreeable to all parties. d. The filing shall include testimony supporting the petition. Exhibit C - Direct Testimony of Bruce S. Grossman Exhibit D - Direct Testimony of Stefany M. Graham Exhibit E - Direct Testimony of Isaac Gabel-Frank

19 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: e. For any proposed program, the utility shall be subject to the requirements in this and all subsequent Sections. If compliance with Part V of these requirements would not be feasible for a particular program or subprogram, the utility may request an exemption but must demonstrate why such exemption should be granted. Examples of historical situations that have qualified for exemption include programs that had an educational rather than equipment-based focus and programs that introduced novel ideas where documentation supporting estimated cost/benefits may not be easily produced. f. If the utility is filing for an increase in rates, charges etc., or for approval of a program which may increase rates/changes to ratepayers in the future, the utility shall include a draft public notice with the petition and proposed publication dates. LOCATION IN FILING Exhibit E Direct Testimony of Isaac Gabel-Frank BSG-1 Program Descriptions Exhibit A Form of Public Notice

20 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: LOCATION IN FILING II. Program Description a. The utility shall provide a detailed description of each proposed program for which the utility seeks approval, including, if applicable: 1. Description of program 2. Market segment/efficiency targeted 3. Delivery Method 4. Estimated program participants 5. Total projected annual kwh/therms and peak reduction 6. Relationship to existing programs 7. Existing incentives 8. Proposed incentives 9. Anticipated job creation 10. Environmental emissions savings 11. Budget information 12. Marketing approach (as defined in section II(g)) 13. Contractor role (as defined in section II(e)) 14. Market barriers (as defined in section II(h)) 15. Program costs, broken down into the following categories: administration; marketing and sales; contractor training; incentives (including rebates and low- or no-interest loans); inspections and quality control; and evaluation. To the extent that the Board directs the New Jersey Clean Energy Program ( NJCEP ) to report additional categories, the utility shall provide additional categories, as applicable. b. Comparison to in-state programs: The utility shall provide a detailed explanation of how the proposed program(s) are consistent with and/or different from existing or proposed New Jersey Clean Energy Program or utility programs (to the extent proposed program descriptions are available) targeting the same market segment, including how the proposed program(s) will complement, supplement, compete with, and/or impact existing programs being offered in-state. Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions BSG-3 - Program Expenditures Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions BSG-4 - Comparison of Programs

21 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: c. Comparison to out-of-state programs: The utility shall provide a detailed description of how the proposed program(s) are similar to and/or different from a sampling of/examples of existing or proposed utility programs or pilots in other states that were used to form the basis of the proposed program(s), with all supporting documentation. d. The utility shall provide a detailed description of how the proposed program comports with New Jersey State policy as reflected in reports, including but not limited to the prevailing New Jersey Energy Master Plan and the greenhouse gas emissions reports to be issued by the New Jersey Department of Environmental Protection pursuant to N.J.S.A. 26:2C- 42(b) and (c) and N.J.S.A. 26:2C-43 of the Global Warming Response Act, N.J.S.A. 26:2C-37 et seq. e. The utility shall provide the extent to which the utility intends to utilize employees, contractors or both to deliver the program and, to the extent applicable, the criteria the utility will use for contractor selection. f. The utility shall provide a detailed description of the process for resolving any customer complaints related to the program(s). g. Marketing The utility shall provide a description of where and how the proposed program(s)/project(s) will be marketed or promoted throughout the demographic segments of the utility s customer base. This shall include an explanation of how the specific service, along with prices, incentives, and energy bill savings for each proposed program/project, will be conveyed to customers, where available and applicable. h. The utility shall provide a description of any known market barriers that may impact the program(s) and address the potential impact on such known market barriers for each proposed program with all supporting documentation. This analysis shall include barriers across the various markets, including residential (both single and multi-family), commercial and industrial (both privately owned and leased buildings), as well as between small, medium, and large commercial and industrial markets. LOCATION IN FILING Exhibit C - Direct Testimony of Bruce S. Grossman BSG-4 - Comparison of Programs Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions Exhibit C - Direct Testimony of Bruce S. Grossman Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions

22 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: LOCATION IN FILING III. Additional Filing Information a. The utility shall describe whether the proposed programs will generate incremental activity in the energy efficiency/conservation/renewable energy marketplace and what, if any, impact on competition may be created, including any impact on employment, economic development and the development of new business with all supporting documentation. This shall include a breakdown of the impact on the employment within this marketplace as follows: marketing/sales, training, program implementation, installation, equipment, manufacturing and evaluation and other applicable markets. With respect to the impact on competition the analysis should include the competition between utilities and other entities already currently delivering the service in the market or new markets that may be created, where applicable. The analysis should also address competition with other entities already currently delivering the service in the market and new markets that may be created, where applicable. Exhibit C - Direct Testimony of Bruce S. Grossman BSG-1 - Program Descriptions b. The utility shall propose the method for treatment of Renewable Energy Certificates ( RECs ) including solar RECs ( SRECs ) or any other certificate developed by the Board of Public Utilities ( BPU or Board ), including Greenhouse Gas Emissions Portfolio and Energy Efficiency Portfolio Standards including ownership and use of the certificate revenue stream(s). Not Applicable The utility shall also propose the method for treatment of any air emission credits and offsets, including Regional Greenhouse Gas Initiative carbon dioxide allowances and offsets, including ownership and use of the certificate revenue stream(s). For programs that are anticipated to reduce electricity sales in its service territory, the utility shall quantify the expected associated annual savings in REC and SREC costs.

23 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: LOCATION IN FILING IV. Cost Recovery Mechanism a. The utility shall provide appropriate financial data for the proposed program(s), including estimated revenues, expenses and capitalized investments for each of the first three years of operations and at the beginning and end of each year of the three-year period. The utility shall include pro forma income statements for the proposed program(s), for each of the first three years of operations and actual or estimated balance sheets at the beginning and end of each year of the three year period. SMG-11 - Proforma Income Statement and Balance Sheet b. The utility shall provide detailed spreadsheets of the accounting treatment of the proposed cost recovery including describing how costs will be amortized, which accounts will be debited or credited each month, and how the costs will flow through the proposed method of recovery of program costs. c. The utility shall provide a detailed explanation, with all supporting documentation, of the recovery mechanism it proposes to utilize for cost recovery of the proposed program(s), including proposed recovery through the Societal Benefits Charge, a separate clause established for these programs, base rate revenue requirements, government funding reimbursement, retail margin, and/or other. d. The utility s petition for approval, including proposed tariff sheets and other required information, shall be verified as to its accuracy and shall be accompanied by a certification of service demonstrating that the petition was served on the Department of the Public Advocate, Division of Rate Counsel simultaneous to its submission to the Board. Exhibit D - Direct Testimony of Stefany M. Graham SMG-10 - Accounting Entries Exhibit D - Direct Testimony of Stefany M. Graham See Verified Petition

24 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: e. The utility shall provide a rate impact summary by year for the proposed program(s), and an annual cumulative rate impact summary by year for all approved and proposed programs showing the impact of individual programs, based upon a revenue requirement analysis that identifies all estimated program costs and revenues for each proposed program on an annual basis. Such rate impacts shall be calculated for each customer class. The utility shall also provide an annual bill impact summary by year for each program, and an annual cumulative bill impact summary by year for all approved and proposed programs showing bill impacts on a typical customer for each class. f. The utility shall provide, with supporting documentation, a detailed breakdown of the total costs for the proposed program(s), identified by cost segment (capitalized costs, operating expense, administrative expense, etc.). This shall also include a detailed analysis and breakdown and separation of the embedded and incremental costs that will be incurred to provide the services under the proposed program(s) with all supporting documentation. Embedded costs are costs that are provided for in the utility s base rates or through another rate mechanism. Incremental costs are costs associated with or created by the proposed program that are not provided for in base rates or another rate mechanism. g. The utility shall provide a detailed revenue requirement analysis that clearly identifies all estimated annual program costs and revenues for the proposed program(s), including effects upon rate base and pro forma income calculations. h. The utility shall provide, with supporting documentation: (i) a calculation of its current capital structure as well as its calculation of the capital structure approved by the Board in its most recent electric and/or gas base rate cases, and (ii) a statement as to its allowed overall rate of return approved by the Board in its most recent electric and/or gas base rate cases. LOCATION IN FILING SMG-1 - Annual Revenue Requirements SMG-12 - Annual Rate and Bill Impact Summary BSG-1 - Program Descriptions BSG-3 - Program Expenditures SMG-1 - Annual Revenue Requirements Exhibit D - Direct Testimony of Stefany M. Graham SMG-2 - Weighted Average Cost of Capital

25 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: i. If the utility is seeking carrying costs for a proposed program, the filing shall include a description of the methodology, capital structure, and capital cost rates used by the utility. j. A utility seeking incentives shall provide all supporting justification, and rationale for incentives, along with supporting documentation, assumptions and calculations. Utilities that have approved rate mechanisms or incentive treatment from previous cases and are not seeking a modification of such treatment through the current filing are not subject to this requirement. LOCATION IN FILING Exhibit D - Direct Testimony of Stefany M. Graham SMG-4 - Monthly Recovery and Interest Calculation Not applicable

26 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: LOCATION IN FILING V. Cost/Benefit Analysis a. The utility shall provide a detailed analysis with supporting documentation of the net benefits associated with the proposed program(s), including, if appropriate, an estimate of its projected avoided cost study with supporting documentation and work papers. This estimate shall include avoided costs associated with, at a minimum, avoided fuel use, generation, losses, capacity requirements, transmission and distribution costs, emissions allowances, RECs and SRECs, and any savings associated with energy and capacity market impacts (i.e., DRIPE) of the program. This cost-benefit analysis should include consideration of seasonal savings and energy prices, and shall be performed on a Net Present Value ( NPV ) basis specifying all financial assumptions, including inflation rate and discount rate. The value of the avoided environmental impacts and the environmental benefits and the value of any avoided or deferred energy infrastructure should be stated separately. Exhibit E - Direct Testimony of Isaac Gabel-Frank IGF-2 - Cost-Benefit Analysis b. The utility shall calculate a cost/benefit analysis utilizing the Participant Cost Test, Program Administrator Cost Test, Ratepayer Impact Measure Test, Total Resource Cost ( TRC ) Test, and Societal Cost Test that assesses all program costs and benefits from a societal perspective i.e., that includes the combined financial costs and benefits realized by the utility and the customer. The utility may also provide any cost benefit analysis that it believes appropriate with supporting rationales and documentation. c. The utility must demonstrate how the results of the tests in section V(b) support Board approval of the proposed program(s). Exhibit E - Direct Testimony of Isaac Gabel-Frank IGF-2 - Cost-Benefit Analysis Exhibit E - Direct Testimony of Isaac Gabel-Frank

27 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: d. Renewable energy programs shall not be subject to a cost/benefit test but the utility must quantify all direct and indirect benefits resulting from such a proposed program as well as provide the projected costs. The utility must also demonstrate how such a proposed program will support energy and environmental statewide planning objectives, such as attainment of the Renewable Portfolio Standard and any emission requirements. e. The level of energy and capacity savings utilized in these calculations shall be based upon the most recent protocols approved by the Board of Public Utilities to measure energy savings for the New Jersey Clean Energy Program. To the extent that a protocol does not exist or an alternative protocol is proposed for a filed program, the utility must submit a measurement methodology for the program/or contemplated measure for approval by the Board. f. For cost effectiveness calculations, the utility shall also estimate and reflect in the energy and capacity savings any free rider and free driver effect, i.e., savings associated with participating customers who would have implemented energy efficiency or renewable energy measures without N.J.S.A. 48: benefits or incentives. Not applicable LOCATION IN FILING Exhibit E - Direct Testimony of Isaac Gabel-Frank Exhibit E - Direct Testimony of Isaac Gabel-Frank

28 EXHIBIT B In the Matter of the Petition of South Jersey Gas Company For Approval To Continue Its Energy Efficiency Programs and Energy Efficiency Tracker Pursuant to N.J.S.A. 48: MINIMUM FILING REQUIREMENTS FOR PETITIONS UNDER N.J.S.A. 48: LOCATION IN FILING VI. Evaluation, Measurement, and Verification ( EM&V ) a. The utility shall provide a quantitative analysis and projections of both the total and percentage reduction in its annual kwh and/or therm sales as a result of the proposed programs, as well as of the projected total in peak load reduction expected from the proposed program(s), over the lifetime of the measures included in the program(s). The utility shall also provide this information expressed as a percentage reduction relative to its current annual peak load. b. For renewable energy programs, the utility shall provide the anticipated contribution to annual kwh and peak load on an annual basis and for the service life of the renewable energy measure. c. An EM&V Plan for each program will include: 1. Methodology for monitoring program progress on program areas 4-15 as described in Section II(a) 2. Program progress results for each of the 12 program areas as compared to projections 3. Lessons learned in implementing the program with a focus on those related to exceeding or not reaching anticipated goals 4. Recommended program enhancements BSG-1 - Program Descriptions Not applicable Exhibit C - Direct Testimony of Bruce S. Grossman

29 EXHIBIT C BEFORE THE NEW JERSEY BOARD OF PUBLIC UTILITIES SOUTH JERSEY GAS COMPANY Direct Testimony of Bruce S. Grossman, Program Manager, Energy Efficiency On Behalf of South Jersey Gas Company

30 I. INTRODUCTION Q. Please state your name, affiliation and business address. A. My name is Bruce S. Grossman, and my business address is One South Jersey Plaza, Route 54, Folsom, New Jersey. I am the Program Manager, Energy Efficiency for the Energy Efficiency Department at South Jersey Gas Company ( South Jersey or Company ). In this position, I collaborate in the planning, development, and management of customer directed program activities of South Jersey s Energy Efficiency Department. I also represent the Company in civic and regulatory forums related to conservation and energy efficiency Q. Please summarize your professional and educational background. A. In total, I have been with the Company for over 39 years, serving in various managerial positions, and have been the Program Manager for energy efficiency initiatives since I have been responsible for residential, commercial and industrial retail sales for the Company and facilitated negotiations for natural gas contracts with some of the Company s largest accounts. Since March of 2001, I have represented South Jersey as one of seven utility managers who work with the administrator of the New Jersey Clean Energy Program, within the New Jersey Board of Public Utilities ( Board or BPU ) Office of Clean Energy ( OCE ). In that capacity I was the Senior Utility Sponsor for the Commercial / Industrial Construction Program, otherwise known as the SmartStart Buildings Program, the Convener of the Combined Heat and Power Program, and the Utility Sponsor for the Home Performance with Energy Star Program. 1

31 I previously represented South Jersey on all of the OCE Energy Efficiency working groups and chaired the Commercial / Industrial Subcommittee of the New Jersey Clean Energy Council. I currently serve as an active member on various committees with the Consortium for Energy Efficiency and serve on the Sustainable Growth Committee of the American Gas Association. In 2017, I joined the Board of the Eastern Heating Cooling Council as Vice Chair. For the past several years, I have served as the Senior Utility Sponsor for the Comfort Partners, Low Income Working Group, which manages the Comfort Partners Low Income Program through the BPU OCE. I earned a Bachelor of Arts degree with Honors in Political Science from Rutgers University Camden College of Arts and Sciences, and a Master s Degree in Public Policy from the Rutgers School of Public Policy, Camden, NJ II. PURPOSE OF TESTIMONY Q. What is the purpose of your testimony in this proceeding? A. The purpose of my testimony is to provide an overview of the Company s existing Energy Efficiency Program ( EEP ) offerings, describe the EEPs proposed by the Company in its EEP IV Petition, and to explain why the proposed EEPs, EEP budgets and program duration are appropriate. I will also address certain Minimum Filing Requirements ( MFRs ) required pursuant to the Board s October 20, 2017 Order in Docket No. QO (the October 2017 Order ) III. EEP PROGRAM HISTORY 23 Q. Please provide a brief overview of the history of SJG s previous and existing EEPs. 2

32 A. On July 24, 2009 in Docket No. GO (the July 2009 Order ), the Board authorized South Jersey to administer five (5) EEPs: (1) Enhanced Residential Heating, Ventilation and Air Conditioning ( HVAC ) Rebate; (2) Residential Home Performance Finance; (3) Combined Heat and Power; (4) Commercial Customer Direct Install Financing; and (5) Non-Residential Energy Efficiency Investment. The EEPs were designed to complement and supplement the then existing offerings of the New Jersey Clean Energy Program ( NJCEP ) and the Company s Conservation Incentive Program ( CIP ), in an attempt to encourage higher levels of participation in energy efficiency programs in South Jersey s service territory. Consistent with the focus of the Regional Greenhouse Gas Initiative ( RGGI ), the then existing New Jersey Energy Master Plan and the Governor s economic stimulus goals, this suite of EEP s were designed to encourage customers to reduce their overall energy usage and stimulate the New Jersey economy by creating additional jobs in the energy efficiency market. In May 2012, the Company filed a second Petition seeking to continue its approved EEPs, with certain modifications, and to implement new EEPs. On June 21, 2013 in Docket No. GO (the June 2013 Order), the Board authorized South Jersey to continue offering its four (4) EEP s through June 2015 with an authorized budget of $24 million (the EEP II Extension Program ) which included: (1) the Residential Home Performance and Finance Energy Efficiency Program; (2) the Non-Residential Energy Efficiency Investment Program; (3) the Enhanced Residential HVAC Rebate Program; and (4) the Commercial Customer Direct Install Financing Program. On January 20, 2015, South Jersey filed a third Petition seeking approval to further extend the approved EEPs, with certain modifications, and to implement a new EEP. On 3

33 August 19, 2015 in Docket No. GR (the August 2015 Order), the Board authorized South Jersey to continue its Residential Home Performance and Finance Energy Efficiency Program, Non-Residential Energy Efficiency Investment Program, Enhanced Residential HVAC Rebate Program, and Commercial Customer Direct Install Financing Program, through August 2017 with an authorized budget of $36.3 million (the EEP III Extension Program ). The August 2015 Order also authorized South Jersey to implement the Social Marketing and Education Program (OPOWER). On January 25, 2017 (the January 2017 Order), the Board approved an extended term of the current EEP III Extension Program to December 31, 2018, with no additional funding IV. PROGRAM OVERVIEW Q. Please describe the proposed EEP IV Program. A. The Company s proposed EEP IV Program consists of nine (9) EEPs which aim to increase energy efficiency offerings to our residential and commercial customers. This proposal includes the continuation of the Company s existing EEPs, including: the Residential Home Performance and Finance Program ( Home Performance ), the Enhanced Residential HVAC Rebate Program ( HVAC ), the Non-Residential Energy Efficiency Investment Program ( Non-Residential ), the Commercial Customer Direct Install Financial Program ( Commercial Direct Install ), and the Social Marketing and Education Program. These programs have been combined into three (3) programs and will be referred to as the following going forward: (1) the NJCEP Residential Loans/Rebates Program, (2) the NJCEP Commercial Loans Program; and (3) the Residential Behavior Program. 4

34 SJG also proposes the following new EEPs: (1) the Residential Efficient Products Program; (2) the Residential Home Assessment with Direct Install Program; (3) the Residential Retrofit Weatherization Program; (4) the C&I Engineered Solutions Program; (5) the Education Program; and (6) the Emerging Technologies & Approaches Program. Detailed program descriptions for each of the proposed EEPs are attached hereto as Schedule BSG-1, as required in MFR Section II.a Q. Please briefly describe the current EEPs that will be continued under the EEP IV. A. The Company proposes to continue its current EEPs offered in SJG s EEP III Extension Program, with limited modifications to the financing terms offered in the NJCEP Residential Loans/Rebates Program and the NJCEP Commercial Loans Program, as discussed in further detail below NJCEP Residential Loans/Rebates Program: This program consists of residential financing and rebate options provided through the Company s existing Home Performance and HVAC programs. With its Home Performance incentives, SJG offers loans to customers participating in the NJCEP Home Performance program to assist in obtaining whole house energy efficiency, comfort and savings. Consistent with the NJCEP Program, pursuant to the June 2015 Board Order in Docket No. QO , SJG offers Home Performance loans up to $10,000 at zero percent (0%) interest with a repayment term of seven years, or loans up to $15,000 at 4.99% interest with a repayment term of ten years. The Company is not proposing any modifications to these incentives. 5

35 With its HVAC incentive, SJG offers either a financing or rebate option to customers that have HVAC equipment in need of replacement. Customers who opt to receive financing receive up to $6,500 towards the cost of the project with no money down and at zero percent (0%) interest, with a repayment term of five years. Alternatively, qualified customers could opt to receive a $500 rebate for the installation of qualified WARMAdvantage heating and water heating equipment purchases. Customers are only able to choose one option, either to apply for financing or apply for a rebate. With both options, customers are required to have a Home Performance with Energy Star home energy assessment performed by a Building Performance Institute (BPI) certified contractor. This program was designed to incentivize customers to install high efficiency HVAC equipment, energy conservation devices such as attic hatch covers and air sealing, health and safety measures such as carbon monoxide detectors, and to motivate customers to consider a Home Performance option. SJG proposes to modify the HVAC incentive for EEP IV by increasing the financing limit from $6,500 up to $14,000 and increasing the rebate offering from $500 to $600. Over the past couple of years, the Company has identified that the costs of equipment and installation have increased significantly, with the costs ranging from $6,300 to nearly $16,000. Additionally, South Jersey plans to upgrade the required home assessment to a complete blower door energy audit for customers entering the loan program. This process will better inform the homeowner regarding where their energy problems are occurring and how to best remedy them, as well as potentially motivate participants to upgrade to a whole house financing approach. The Company also proposes to extend the loan repayment term from five to seven years to align with the terms currently offered by 6

36 the SJG and NJCEP Home Performance Programs discussed above. Overall, the Company s proposed modifications intend to make the loan payment more affordable to customers and drive increased participation in this EEP through both loan and rebate options NJCEP Commercial Loans Program: This Program consists of commercial financing options through the Company s existing Non-Residential and Commercial Direct Install programs. With its Non-Residential incentive, SJG offers financing up to $100,000 to eligible non-residential customers with no money down and at zero percent (0%) interest, with a repayment term of five years. This program was designed to generate large energy savings for large commercial and industrial customers. The total amount financed shall not exceed the total project cost, less all NJCEP rebates and incentives. The needs of the customer are assessed by a representative of the NJCEP Market Manager. Through the EEP IV, the Company is proposing to increase the financing limit from $100,000 up to $130,000 and to extend the loan repayment term from five to ten years to provide commercial customers with lower monthly payments and ultimately drive increased participation in this EEP. With its Direct Install incentive, SJG offers qualified customers financing up to 30% of the project cost, up to a maximum of $53,571, with no money down and at zero percent (0%) interest, with a repayment term of three years. The program was designed to encourage participation in the NJCEP Direct Install Program by financing the difference between the project s cost and the incentive provided by the NJCEP Direct Install program, which provides an incentive that covers 70% of a project s cost, up to a maximum of 7

37 1 2 3 $125,000. Through the EEP IV, the Company is proposing to extend the loan repayment term from three to five years to provide commercial customers with lower monthly payments and drive increased participation in this EEP Residential Behavior Program: With the Company s Residential Behavior Program, SJG will continue to provide customers with easy-to-understand information regarding energy use, peer usage, and suggested action steps to generate awareness and motivate customers to produce energy savings through behavioral changes and engagement with other EEPs. This is intended to be an expansion of the social marketing and education approach that the Company currently implements through its contract with OPOWER. However, South Jersey intends to issue a Request for Proposal ( RFP ) to several vendors that provide similar services, in order to ensure that enhanced functionality can be captured and that vendor costs are competitive. Direct mail and/or electronic home energy reports ( HERs ) will be the cornerstone of the Program and will provide participants with customized, easy to implement action steps and recommendations to reduce energy consumption and support behavior modification for improved energy efficiency. The Program will also offer an internetbased home energy self-audit to all residential customers. This audit will allow customers to better understand their energy usage and opportunities for energy savings Q. Please briefly describe the new EEPs proposed in EEP IV. A. SJG is proposing several new energy efficiency initiatives to attract and engage both residential and commercial customers, as discussed further below. 8

38 Residential Efficient Products Program: The Residential Efficient Products Program will promote low and moderately priced energy efficiency products by offering a broad range of energy efficient measures through a variety of channels, including an online marketplace, potential retail in-store rebates, and a network of trade allies. The program will encourage customers to invest in smart thermostats, water saving measures, weatherization items, as well as pre-packaged conservation kits. Installation services will be offered as a component of the program for the smart thermostats. Measures range in type and price but include both natural gas and limited electric energy saving measures that improve energy efficiency in the home. Incentives will be offered on all technologies to reduce initial costs. The program is designed to provide easy and cost-effective access to energy efficient measures through customer preferred channels and provide a means to encourage customers to take the first steps toward energy efficiency. In addition, SJG plans to partner with local foodbanks to distribute no-cost conservation kits to their clients to provide educational information on energy efficiency programs, help provide energy savings assistance to low-to-moderate income customers, and ensure awareness of other available resources, including NJCEP Comfort Partners. This effort will be made in conjunction with the Education Program to enhance outreach opportunities through multiple channels Residential Home Assessment with Direct Install Program: The Residential Home Assessment with Direct Install Program provides customers with an assessment to explore and invest in the improved comfort and energy efficiency of their home. The assessment 9

39 will cost customers $49.00 and will be completed by a trade ally partner(s). During the assessment, customers will benefit from the installation of low-cost measures such as LED lighting, low-flow water devices, and smart electric strips at no additional cost, as well as behavioral suggestions to improve efficiency of the home and a review of thermostat setpoints. Smart thermostats may be made available while the auditors are on the premises through the Residential Efficient Products Program. Following the in-home assessment, the participant will be provided with an energy efficiency action-plan that summarizes the findings of the audit and recommends technology and building performance improvements that will maximize the efficiency of the home. This report will also include details regarding estimated costs, available rebates, and availability of financing programs Residential Retrofit Weatherization Program: SJG proposes to offer free weatherization services and energy education to residential customers who do not qualify for the State s Comfort Partner Low Income Program, i.e., those whose household income is between 226% and 400% of the annual Federal Poverty Income level. Home audit and cost weatherization work (up to $6,000) will be performed by a team of BPI certified contractors. If South Jersey is made aware of a significant health and safety issue, the Company will evaluate if the system can be repaired (up to $1,000) or replaced on a caseby-case basis, if funds permit. For homes that require treatment beyond the scope of the EEP, such services may be coordinated with other local agencies C&I Engineered Solutions Program: The C&I Engineered Solutions Program will provide tailored energy efficiency assistance to public service entities, such as 10

40 municipalities, universities, schools, hospitals, non-profit entities and multi-family facilities. This program is designed to provide specialized services through a contracted engineering firm to assist customers in identifying and undertaking large energy efficiency projects on site, while requiring no up-front funding from the customer. Through this program, customers will be provided with an in-depth audit of their facilities, as well as a detailed assessment and recommendation of energy efficiency measures that could be economically installed. Customer offerings will be determined on a project-by-project basis and may include incentives and/or financing options. If a loan is provided, participants will have the option to pay back the related project costs through interest free financing over a period of five years, or ten years for Home Mortgage Finance Agency (HMFA) qualified multi-family facilities. This program was intended specifically to reach participants in market segments that have typically been underserved or unable to achieve greater energy savings with the current program offerings Education Program: The Education Program is designed to foster energy literacy, provide students with workforce development opportunities, drive energy savings at schools, promote home energy awareness, and distribute home energy efficiency kits to students for their households. SJG intends to partner with Alliance to Save Energy to implement this program. This program is turnkey for SJG as it is rooted in Alliance to Save Energy s experience working with utilities and providing energy efficiency education free-of-cost to schools, reaching over 250,000 students across the U.S. since

41 Emerging Technologies & Approaches Program: The Emerging Technologies and Approaches Program is designed to evaluate, demonstrate, and deploy the next generation of technologies and customer engagement approaches, promote economic development in New Jersey, and coordinate research and development activity and lessons learned with other utilities in New Jersey. By supporting the development and widespread adoption of advanced energy efficiency technologies and customer engagement approaches, this program will support State-wide goals for efficiency and greenhouse gas reductions, including collaborative research facilitated by a third-party implementation contractor, such as a New Jersey research entity. Additional reporting and review processes will be implemented, along with the development of a committee consisting of representatives from utilities, government, trade allies, and other stakeholders Q. Please describe the potential points of entry and customer paths. A. The Company s EEPs are designed to offer customer entry flexibility at different points in the process and the opportunity to participate in multiple programs. Throughout the process, SJG will continue to educate customers and promote other available EEPs. As such, customers can start or stop their journey at any point based on their individual energy efficiency journey. For example, a customer participating in the Residential Home Assessment with Direct Install Program may decide, after receiving a home assessment, to ultimately purchase a Smart Thermostat through the Residential Efficient Products Program and/or implement whole-house energy measures through the NJCEP Residential Loans/Rebates Program. This potential path for a residential customer is demonstrated further on Schedule BSG-2, attached hereto. 12

42 V. PARTICIPATION AND BENEFITS Q. Please describe the participation rates related to SJG s existing EEPs. A. Customer participation has increased significantly over the past few years with the implementation of SJG s loan and rebate programs. The following is a summary of participation rates since the inception of the EEPs in 2009 through January 2018: Residential Programs Participants Enhanced HVAC Loans & Rebates 9,144 Home Performance 4,496 Social Marketing and Education Program (OPOWER) 172,113 Subtotal Residential EE Programs 185, Commercial & Industrial Programs Participants Commercial Direct Install 72 Non-Residential 112 Combined Heat and Power - Discontinued 2 Subtotal C&I Programs 186 Total 185,939 Q. Please summarize the benefits achieved through SJG s existing and proposed EEPs. A. The Company s existing EEPs have been tremendously successful and have also motivated customers to take advantage of the NJCEP programs. As a result, SJG developed the proposed EEP IV to provide expanded availability of energy efficiency initiatives for its customer base. This effort is directed to all customer groups, including those most in need of support and those most challenging to reach, including low and moderate income, businesses, and local government customers The proposed EEPs will align with State policy and reduce natural gas and electric bills, reduce greenhouse gas emissions in furtherance of New Jersey s Global Warming 13

43 1 2 Response Act, increase employment and associated economic activity, reduce local pollution, and drive economic activity Q. Has the Company performed a program evaluation and if so, what were the results? A. Pursuant to the Board s Order in Docket No. GR , the Company engaged Applied Public Policy Research Institute for Study and Evaluation ( APPRISE ) to conduct an independent evaluation of its EEPs and report on its findings. The results of the evaluation were provided to BPU Staff and Rate Counsel on September 1, Overall, APPRISE found that SJG s EEPs have increased investments in energy efficiency and resulted in high natural gas savings and recommended a continuation of the EEPs VI. PROGRAM BUDGET AND DURATION Q. What is the Company s proposed overall program investment and administrative cost budget? A. SJG is proposing an investment budget of approximately $166.7 million and an administrative budget of approximately $28.7 million, for a total overall program budget of approximately $195.4 million. The administrative costs, also referred to as operating and maintenance expenses ( O&M ), include administration, marketing and sales, training, inspections and quality control, and evaluation costs to support the delivery of the EEPs. A summary of the proposed expenditures for each EEP, including a breakdown by cost category, is shown on Schedule BSG-3. Based on market conditions and the level of market response to each EEP, South Jersey also proposes that it have the ability to transfer funding between EEPs after the 14

44 1 2 initial year of the program, in order to maximize energy savings, program resources, and/or to react to changes in the marketplace Q. Please summarize the proposed time period for which these investments will be made. On January 25, 2017, pursuant to Docket No. GO , the Board approved an extended term of the current EEP III Extension Program to December 31, 2018, with no additional funding. As a result, the Company is prepared to and is requesting that the EEP IV Extension Program commence at the date of Board approval and continue for a period of five years through December 31, Q. Why is SJG proposing a five-year continuation of its EEPs? A. Offering the proposed EEPs for a five-year term provides several important benefits that will contribute to the success of the programs. First, and most importantly, a multi-year program enables South Jersey to provide consistent messaging to its customers and facilitates continued customer interest in the EEPs. Programs that are offered on a yearto-year basis create customer confusion and uncertainty as to the status and availability of the EEP offerings. This could ultimately lead to lower participation levels, and therefore reduced energy savings. Likewise, for contractors to invest in technical equipment, training, and vehicles, and in some cases building leases, it is important that the programs remain consistent over a longer period of time. In addition, a five-year program will provide greater certainty to the contractors and trade allies providing energy efficiency services in South Jersey s territory. In turn, 15

45 contractors will be able to develop longer term business and marketing strategies and will be encouraged to hire in the energy efficiency arena. Finally, several of the new proposed programs require a longer lead time to ramp up and successfully sustain the programs. For example, SJG and trade allies will need to engage and retain the appropriate staff, equipment, and administrative resources to promote the EEPs effectively. Securing a five-year program will allow SJG to fully implement and insert these programs into the marketplace efficiently with a qualified workforce. 8 9 VII. DATA & REPORTING Q. What data does SJG intend to collect and evaluate for the proposed programs? A. By partnering with the NJCEP Market Managers and other vendors, South Jersey has collected data regarding annual and lifetime energy savings, environmental air quality improvements (such as CO2 annual and lifetime metric ton emission reductions), and program participant rates. Additionally, the Company has collected financial reporting in terms of investments, operating and administrative costs, the number of program participants who have applied for loans, along with the value of those pending financial commitments. We will continue to collect this data for all proposed programs to monitor the EEPs internally and report to the appropriate parties, as discussed further below Q. Please describe the current and proposed reporting mechanism. A. Pursuant to the EEP III Extension Order in Docket No. GR , the Company currently provides monthly activity reports to the BPU and Rate Counsel, which include investments, administrative costs, and the number of participants for its EEPs on an 16

46 ongoing basis. The Company also provides quarterly activity reports that summarize the related monthly activity reports, with the addition of job creation and loan activity data. The Company proposes to continue providing monthly and quarterly activity reports for the proposed EEPs, commencing upon Board approval of EEP IV through the end of the five-year program. Those reports will be provided no later than sixty (60) days after the end of each calendar month, or quarter end. 7 8 VIII. ADDITIONAL MINIMUM FILING REQUIREMENTS Q. Please provide a detailed explanation of the differences and similarities between each proposed program and programs offered by the New Jersey Clean Energy Program, as well as programs offered by other utilities. A. A comparison of SJG s proposed EEPs and the programs offered by the NJCEP and other New Jersey utilities is reflected in the program descriptions on Schedule BSG-1, as well as the summary chart attached hereto as Schedule BSG Q. Please describe how the proposed programs are similar or different from programs offered in other states. A. A comparison of SJG s proposed EEPs and those offered in other states is reflected in the summary chart attached hereto as Schedule BSG Q. Please provide a detailed description of how the proposed EEPs comport with the New Jersey State policy as reflected in reports, including the New Jersey Energy 17

47 Master Plan and the greenhouse gas emissions reports issued by the Department of Environmental Protection. A. The Company has designed its proposed EEPs to be coordinated with the NJ Clean Energy Program ( NJCEP ), as was done with the previous EEPs that were approved by the Board in 2009, and subsequently extended in 2013 and Our philosophy has been to partner with the OCE to accelerate activity within South Jersey s service area, to motivate contractor resources to become energy program advocates, and to be able to provide program services that generate energy and environmental benefits to our customers. Descriptions regarding each of the EEPs are provided in further detail in Schedule BSG-1. While the Company has designed its programs to complement and supplement the existing NJCEP, SJG recognizes that the current program offerings may shift as NJCEP implements changes to align with the anticipated State Strategic Plan Q. Please describe the extent to which the Company intends to utilize employees, contractors or both to deliver the EEP IV Program, as well as the criteria for contractor selection. A. The Company will administer and manage the EEP IV Program utilizing SJG employees, as well as support from third-party implementation contractors. We plan to use third-party implementation contractors for specialized services, such as inspections, loan processing, home energy reports, and the proposed online marketplace platform. Further details regarding the vendor selection process and contractors required for each program are reflected in Schedule BSG

48 Q. Please describe the process for resolving any customer complaints related to these programs. A. Customer complaints received by the Company regarding any of the proposed programs will be directed to the Program Manager, Energy Efficiency, for prompt investigation and resolution. The Company does not anticipate that any complaints would escalate to a level that would result in the filing of a formal complaint with the BPU. In the event that a complaint is filed, the Company will make every effort towards achieving an amicable resolution of the complaint made against the Company Q. Please describe SJG s process for customer data protection and security. A. The Company will maintain and protect customer data from unlawful dissemination consistent with applicable law, including all New Jersey statutory and BPU regulatory obligations. SJG will implement privacy and data handling policies and procedures that are consistent with its customer data security protections and any applicable BPU regulations and statutory obligations. The Company will not sell or share any individual customer information or aggregated customer data, except as specified. SJG may share customer information or aggregated customer data with outside third-party implementation contractors, vendors, or trade allies to implement and/or evaluate SJG s energy efficiency programs, and these companies shall use that information/data for the sole purpose of Program implementation and evaluation Q. Please describe the marketing efforts that SJG will engage in to promote the proposed EEPs to its customers. 19

49 A. Since SJG began offering EEPs, the promotion of energy efficiency has become an integral part of our conversation with existing and prospective customers. Whether speaking with a homeowner, a business owner, or a local/county government official, discussing the importance of energy efficiency is a top priority. Building on the success of previous marketing and educational outreach programs, SJG will continue to use a multi-layered approach to advance the goals of our utility and of the State. These outlets could include, but are not limited to, the following channels: newspaper, television, radio, direct mail, website, billboards, social media, and SJG customer communications. Educational and marketing materials are also disseminated at trade shows, community fairs and public outreach events. Further detail on marketing efforts for each EEP is reflected in Schedule BSG Q. What are the potential market barriers to South Jersey s proposed programs, if any, and how do the proposed programs address these market barriers? A. The primary market barriers that impact the proposed EEPs include the initial cost for energy efficiency (e.g. equipment, products, home retrofits), trade ally awareness and training, and customer awareness and education. Initial Cost: High efficiency HVAC equipment and home retrofits are more expensive and involved, requiring increased investments and commitments from participants. Additionally, efficient products often carry a higher upfront cost. Customers may not have the necessary capital to participate or may not realize the lower lifetime operating cost advantage when initially reviewing these options. 20

50 Trade Ally Awareness and Training: To meet the participation goals for this program, trade allies must be available to perform the work, trained, and interested in promoting and marketing high-efficiency equipment and services to customers. Customer Awareness and Engagement: Residential and commercial customers may not be aware of the best energy efficiency opportunities for their home or business and where to obtain the information and resources they need. SJG will seek to manage barriers to program success through a commitment to applying best practices in program design, delivery, outreach, and marketing/advertising. To the extent possible, SJG will cross-promote programs to spread awareness of the range of efficiency opportunities proposed in this plan. SJG has a strong relationship with trade allies and will continue to regularly train and educate them on the benefits of promoting our EEPs. Further detail on potential market barriers for each EEP is reflected in Schedule BSG Q. Will the proposed programs generate incremental activity in the energy efficiency/conservation marketplace? If so, what impact, if any, on competition may be created? A. The proposed EEPs are not only designed to increase energy savings and environmental benefits, but also to stimulate the economy through job creation. With the implementation of the Company s proposed programs, economic models show that our investment could 21

51 generate approximately 1,208 direct and/or indirect jobs 1. Further detail on potential job creation for each EEP is reflected in Schedule BSG-1. With regard to competition, the Company s approach is to foster customer engagement in the NJCEP and to encourage contractor program participation. South Jersey encourages companies to obtain their proper certifications and accreditations, and thereby offer customers more choices for contractor selection and create competitive pricing for the consumer. Moreover, South Jersey s model is not designed to compete with offerings or services provided by another utility or the BPU, but rather complement contractor and NJCEP efforts Q. Please describe SJG s proposed Evaluation, Measurement and Verification ( EM&V ) plan. A. South Jersey Gas intends to secure an independent evaluation contractor to conduct impact and process evaluations for all SJG s programs over the course of the five-year program. SJG s independent evaluation contractor will use industry standard methodology and practices to determine baseline and savings values for use in the evaluation studies. The evaluation, measurement, and verification study will provide the methodology for monitoring program progress, including a comparison of actual results to projections, and identify lessons learned in implementing the program. The study will also recommend program enhancements based upon the findings of the evaluation. 1 The number of jobs is based on the Rutgers report Analysis for the 2011 Draft New Jersey Energy Master Plan Update using the 7.91 per one million investor factor ( 22

52 Other studies may be commissioned by SJG to be conducted by independent contractors. These may include: review of savings protocols, baseline studies to confirm existing conditions, customer and trade ally feedback, market potential studies to assist with continuous program planning and program development, and known best practices. 5 6 IX. CONCLUSION Q. Please summarize why the BPU should approve EEP IV. A. Consistent with the New Jersey Energy Master Plan, the proposed EEP s are designed to encourage customers to reduce their overall energy usage, improve the environment, and stimulate the New Jersey economy by creating additional jobs in the energy efficiency market. Implementing the proposed EEP IV will allow SJG to continue the momentum achieved thus far on the existing programs, while also expanding program offerings to reach customers of all demographics and increase participation within SJG s territory Q. Does this conclude your testimony? A. Yes, it does. 23

53 BSG-1 Page 1 of 51 South Jersey Gas Energy Efficiency Program Plan

54 BSG-1 Page 2 of 51 Table of Contents Table of Contents Index of Tables i ii 1. INTRODUCTION 1 2. PROGRAM OVERVIEW 2 3. PROGRAM DESCRIPTIONS SJG Residential Sector Programs Residential Behavior Residential Efficient Products Residential Home Energy Assessment with Direct Install Residential Retrofit Weatherization SJG Commercial & Industrial Sector Programs C&I Engineered Solutions SJG Research & Development and Other Sector Programs Emerging Technologies and Approaches Education NJCEP Loan/Rebate Programs NJCEP Residential Loans/Rebates - HPwES/HVAC NJCEP Commercial Loans PROGRAM MANAGEMENT AND MARKET FACTORS Anticipated Job Creation Environmental Emissions Savings Energy Savings 46 i

55 BSG-1 Page 3 of 51 Index of Tables Table 1: Program Overview 2 Table 2: Total Program Expenditures ($millions) 3 Table 3: Residential Behavior Estimated Participation and Savings 5 Table 4: Residential Behavioral Costs 7 Table 5: Residential Efficient Products Estimated Participation and Savings 9 Table 6: Residential Efficient Products Costs 12 Table 7: Residential Home Energy Assessments with Direct Install Estimated Participation and Savings 14 Table 8: Residential Home Energy Assessment with Direct Install Costs 16 Table 9: Residential Retrofit Weatherization Estimated Participation and Savings 17 Table 10: Residential Retrofit Weatherization Costs 19 Table 11: C&I Engineered Solutions Estimated Participation and Savings 21 Table 12: C&I Engineered Solutions Costs 24 Table 13: Key ETA Program Collaborators and Responsibilities 27 Table 14: Efficiency ETA Program Costs 32 Table 15: Educatioin Estimated Participation 34 Table 16: Education Program Costs 36 Table 17: NJCEP Residential Loans/Rebates Estimated Participation and Savings 38 Table 18: NJCEP Residential Rebate/Loans Estimated Costs 41 Table 19: NJCEP Commercial Loans Estimated Participation and Savings 42 Table 20: NJCEP Commercial Loans Estimated Costs 44 Table 21: Direct, Indirect, and Induced Job Creation 45 Table 22: Total Emissions Reduction by Program 46 Table 23: Incremental Annual Gas Savings (therm) and Percent of Gas Sales 47 Table 24: Incremental Annual Electric Savings (kwh) and Electric Demand Savings (kw) 48 ii

56 BSG-1 Page 4 of INTRODUCTION South Jersey Gas Company (SJG) delivers safe, reliable, and affordable natural gas and promotes energy efficiency to approximately 383,000 residential, commercial and industrial customers in the seven southernmost counties of New Jersey. With a territory of over 2,500 square miles, one third of the geographic area of New Jersey looks to SJG for natural gas and energy efficiency services. This Energy Efficiency (EE) Program Plan was developed by SJG in order to provide expanded availability of energy efficiency initiatives to its customer base, reduce ground-level and atmosphere pollution, and further the energy goals of the State. SJG is proposing to offer new and innovative energy efficiency programs (EEPs) and services within its service territory, as well as continue to support the New Jersey Clean Energy Programs (NJCEP) EEP s through low and no cost financing for participants in its EEP IV program filing. This EE Program Plan will increase energy efficiency deployment within the SJG service territory, consistent with State and federal policy, including but not limited to the current New Jersey Energy Master Plan and the greenhouse gas emissions reports issued by the New Jersey Department of Environmental Protection. 1 This effort is directed to all customer groups, including those most in need of support or most challenging to reach, including low and moderate income, small businesses, and local government customers. This EE Program Plan encompasses nine (9) programs, including R&D initiatives which will incentivize investment in energy efficiency throughout SJG s service territory, and will result in benefits throughout the entire State. The proposed programs will align with State policy, and reduce customer natural gas and electric bills, reduce greenhouse gases in furtherance of New Jersey s Global Warming Response Act, increase employment and associated economic activity, reduce local pollution, and drive economic activity. In particular, this EE Program Plan contains the following: An overview of the proposed EEP IV program; Descriptions of all nine programs contained within the proposed EEP IV program; Quantitative analysis and projections of the costs and savings associated with proposed programs; and Details on proposed EEP IV Program and program management, as well as the programs interaction with the market. Overall, this EE Program Plan represents an expansion of SJG s efforts in the energy efficiency sector by utilizing SJG s unique relationship with its customers. The EE Program Plan provides a 1 Pursuant to N.J.S.A. 26:2C- 42(b) and (c); N.J.S.A. 26:2C-43 of the New Jersey Global Warming Response Act, N.J.S.A. 26:2C-37 et seq.; and the policies of the State. 1

57 BSG-1 Page 5 of 51 pathway for New Jersey to achieve the energy goals of the Governor, as well as realize reduced energy costs and benefits for our environment and economy. 2. PROGRAM OVERVIEW The EEP IV program consists of nine (9) programs that aim to increase energy efficiency throughout the South Jersey Gas service territory. To implement these programs, SJG estimates a total budget of approximately $195 million over a five year period. This Program Plan provides customers with a mix of existing and new energy efficiency programs administered by SJG, as well as additional loans and rebates to increase participation in the NJCEP administered programs. The availability of State-run programs through NJCEP, as well as individual programs meant to target markets and savings not captured by the NJCEP programs, places SJG at the center of the energy efficiency activity within its service territory. The programs are designed to complement one another and the combination of the SJG administered programs with those administered by NJCEP are expected to reduce natural gas consumption every year over the proposed program period. The Program Plan consists of the following programs: Table 1: Program Overview SJG Residential Sector Programs Res Behavior Res Efficient Products Res Direct Install Res Retrofit Weatherization SJG C&I Sector Programs C&I Engineered Solutions SJG R&D and Other Sector Programs Emerging Technologies & Approaches Education NJCEP Loan/Rebate Programs NJCEP Res Loan/Rebate Programs NJCEP C&I Loan Programs 2

58 BSG-1 Page 6 of 51 To accomplish the goals set forth in this Program Plan, SJG anticipates the following program related spending: Table 2: Total Program Expenditures ($millions) Program Total Res Behavior $0.0 $1.3 $1.3 $1.3 $1.3 $1.3 $0.0 $6.6 Res Efficient Products $0.1 $3.9 $4.6 $4.9 $4.8 $4.7 $0.3 $23.2 Res Direct Install $0.0 $1.2 $1.4 $1.5 $1.6 $1.8 $0.1 $7.6 Res Retrofit Weatherization $0.0 $1.0 $1.8 $2.5 $3.3 $4.0 $0.1 $12.7 C&I Engineered Solutions $0.0 $0.4 $1.3 $3.1 $4.9 $6.7 $0.2 $16.7 NJCEP - Residential Programs $0.2 $13.4 $16.7 $20.4 $22.6 $25.1 $2.0 $100.3 NJCEP - Commercial Programs $0.1 $1.8 $2.0 $2.3 $2.2 $2.2 $0.2 $10.8 Education $0.0 $0.6 $0.8 $1.0 $1.0 $0.9 $0.0 $4.3 ETA $0.0 $0.2 $1.8 $1.8 $1.9 $1.9 $0.1 $7.7 Evaluation $0.0 $0.9 $0.9 $0.9 $0.9 $0.9 $1.0 $5.5 Total $0.4 $24.7 $32.6 $39.6 $44.5 $49.5 $4.1 $195.4 It should be noted that approximately $89.1 million of these expenditures are in the form of loans to participants, which are paid back to SJG, and ultimately ratepayers. Approximately $77.6 million of the spending is in direct investment, which includes rebates, incentives, and other capitalized expenditures, and approximately $28.7 million is expense spending to support the operation and administration of the programs. While customer enrollment in the various programs may end at the conclusion of SJG s programs, SJG will continue to incur costs to administer these programs until such time that all services are fulfilled. These costs include loan administration, product fulfillment, internal administrative costs, and program evaluation. It is anticipated that these costs will total $4.1 million and are summarized above. 3. PROGRAM DESCRIPTIONS This section contains detailed design descriptions and budget information for each proposed program. While there are nine discrete programs, it should be recognized that these programs were designed on an integrated basis and many programs provide a stepping stone (through greater education, customer engagement, or installation of easier to implement measures) that can lead to more advanced energy measures, technologies, and opportunities for savings. Each program description is organized to provide the following information: Overview; Market Segment/Efficiency Targeted; Delivery Method; Projected Participants and Energy Savings; Relationship to Existing Programs; 3

59 BSG-1 Page 7 of 51 Proposed Incentives; Marketing Approach; Contractor Role; Market Barriers; and Program Costs. It is expected that SJG will have the flexibility to adjust program delivery, marketing, implementation, incentive levels, and budgets periodically in order to keep pace with the everchanging energy efficiency marketplace SJG Residential Sector Programs The proposed residential programs will work together to significantly upgrade efficiency in homes throughout SJG s service territory. This EE Program Plan provides information on the following programs: Residential Behavior; Residential Efficient Products; Residential Direct Install; and Residential Retrofit Weatherization Residential Behavior The Residential Behavior program will provide customers with granular and easy-to-understand information about their energy use, the usage of their peers, and suggested steps to generate awareness and motivate customers to produce energy savings through behavioral changes and engagement with other EEPs. This is intended to be an expansion of the general approach that SJG currently implements through its OPOWER program. However, SJG intends to issue a Request For Proposals (RFP) to several vendors that provide similar services in order to ensure that enhanced functionality can be captured and that vendor costs are competitive. Direct mail and/or electronic home energy reports (HERs) will be the cornerstone of this program and will provide participants with customized, easy to implement action steps and recommendations to reduce energy consumption and support behavior modification for improved energy efficiency. The HERs will present participants with a view of their historical energy consumption compared to peer group customers. The program will also offer an internet-based home energy self-audit to all residential customers. This audit will allow customers to better understand energy usage and savings opportunities. Depending on the results of the RFP process, this functionality may be provided by the same vendor issuing the HERs, or a different vendor supporting other programs. An online portal will be used to provide customers with usage information, recommendations, tips, and links to energy efficiency programs provided by SJG, including the online marketplace with access to other Residential Programs - Efficient Products and Home Energy Assessment with Direct Install, Residential Retrofit Weatherization, as well as relevant Office of Clean Energy (OCE) programs financed by SJG. The online customer portal will integrate the information from 4

60 BSG-1 Page 8 of 51 the HERs and online audit to further assist customers as they look to realize deeper energy savings. SJG will utilize the information gathered from the HERs and online audits, to better understand the residential customer base and improve program offerings. Market Segment/Efficiency Targeted This program will provide home energy reports to 170,000 single family residential customers. This quantity will be reviewed periodically and modified as needed to maximize cost-effective energy savings. The online energy audit will be available to all South Jersey Gas residential customers. The HERs and online audit will offer tailored recommendations to reduce their energy consumption. The efficiency savings target for this program is behavior change. The program will also induce additional customer investments in other programs, but these energy savings will not be reported in the evaluated savings for this program. Delivery Method SJG s HER vendor will identify and distribute HERs to residential customers at no charge to the participant. The online audit will be available at no additional cost for all SJG residential customers. Subsequent to the launch of the program. Projected Participants and Energy Savings The projected participation and savings associated with this program are summarized in the table below. All values are annual incremental totals, and do not incorporate savings achieved in prior years. A participant in the context of the Residential Behavior program is a residential customer, not a home energy report. Savings estimates are based on projected participation during each year of the forecast period. Table 3: Residential Behavior Estimated Participation and Savings Program Participants 170, , , , ,000 Natural Gas Savings (therms) 1,235,560 1,235,560 1,235,560 1,235,560 1,235,560 Electric Savings (kwh) 5,100,000 5,100,000 5,100,000 5,100,000 5,100,000 Electric Demand Savings (kw) Relationship to Existing Programs The Residential Behavior program has similar components to the existing SJG Social Marketing and Education program. Some peer utilities within the state, including Atlantic City Electric, New Jersey Natural Gas, Public Service Electric & Gas, and Elizabethtown Gas are also running home energy reporting programs for residential customers and online audit tools. Jersey Central Power & Light only provides an online audit tool but it is not integrated with specific information about energy efficiency incentives available in New Jersey. This program will complement the peer utility 5

61 BSG-1 Page 9 of 51 programs and include additional direction to next steps for residential customers within SJG territory. The NJCEP does not offer any similar programs at this time. Proposed Incentives All services under this program will be provided at no cost to the customer. Marketing Approach The residential behavior program will not require marketing for participation. However, the program provides SJG an opportunity to market other program offerings and relevant NJCEP programs. Contractor Role SJG will utilize a third-party vendor implementation contractor to provide the services under this program. Market Barriers The primary market barriers that this program addresses include: Lack of Information: Most customer have no sense of how their consumption compares with other households. This program addresses this barrier providing energy use information to customers through the HERs. The HERs also include additional information about how customers can reduce bills through tips and marketing to other programs. Customers who do not receive HERs but are interested in learning more can take advantage of the self-service online audit. Lack of Customer Effort: While many utilities have offered self-service online audits for years, the traditional participation rate is very low. This program addresses this barrier by sending the HER reports directly to the customer numerous times throughout the year. The customer does not have to initiate the engagement about their energy usage. 6

62 BSG-1 Page 10 of 51 Program Costs The table below illustrates the projected program expenditures for the program. Table 4: Residential Behavioral Costs Subprogram Total Administration $575 $36,802 $37,793 $38,918 $39,973 $41,060 $10,920 $206,041 Marketing and Sales $2,875 $48,050 $46,637 $45,932 $44,294 $42,522 $16,089 $246,398 Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,190,000 $1,190,000 $1,190,000 $1,190,000 $1,190,000 $0 $5,950,000 $1,275 $22,405 $19,695 $20,045 $20,354 $20,672 $5,625 $110,070 Evaluation $375 $6,770 $6,860 $7,006 $7,103 $7,204 $2,202 $37,519 Total $5,100 $1,304,026 $1,300,985 $1,301,901 $1,301,724 $1,301,457 $34,835 $6,550, Residential Efficient Products The Residential Efficient Products program will promote energy efficiency products by offering a range of energy efficient measures through a variety of channels, including an online marketplace, potential retail in-store rebates, and collaboration with schools and local foodbanks. This program offers incentives on a variety of products for customers through up-front rebates to reduce initial costs. The program will incentivize customers to purchase and install smart thermostats, water saving measures, weatherization items, as well as pre-packaged conservation kits. These measures range in type and price but include both natural gas and limited electric energy saving measures that improve energy efficiency in the home. The program is designed to provide easy and costeffective access to energy efficient measures through customers' preferred channels, and also provide a means to encourage customers to take the first steps toward energy efficiency. SJG will also consider expansion of the energy efficient products based on success of the program. The program is designed to provide online channels for customers to purchase a variety of products, as well as ensure the participation process is clear and easy for the customer. 7

63 BSG-1 Page 11 of 51 In addition, energy savings kits will be distributed in coordination with the Education program, as well as at foodbanks to reach customers, many of whom are economically disadvantaged, that likely would not be participating in other program offerings. Ensuring equity of program offerings is an important goal for SJG. This program will allow those individuals access to energy efficiency products, through their children (in the Education program) and through food banks where they may attend. SJG will work with food banks in the SJG service territory to ensure food bank recipients have an opportunity to receive a conservation kit onsite. This will require SJG staff to educate food bank staff on the value of the kits to clientele and ensure the delivery and distribution of the kits is as easy as possible. The program will also likely reach low income renters, a segment of customers unlikely to participate in the NJCEP Comfort Partners Program. Market Segment/Efficiency Targeted The Residential Efficient Products program will be available to all natural gas customers in the SJG territory. The efficiency target for this program will be heating and cooling (thermostats, minor building envelope measures), plug load (smart strips), water heating (low flow showerheads and aerators), and efficient lighting. The kits are primarily targeted at limited and low income residential customers in the SJG service territory. The distribution of the kits at food banks also increases the likelihood of reaching the intended target because it eases the burden of participation sometimes faced in other programs. Kits assembled for distribution in the Education program, and at food banks, may include low flow aerators and showerheads, LED bulbs, smart power strips, and educational energy savings tips. Delivery Method SJG will use its brand, customer outreach infrastructure, and marketplace relationships to increase the availability, awareness, and customer uptake of energy efficient products. SJG will utilize our internal marketing communication tools, including monthly customer bill inserts and messages that will appear on the Company s website, as well as other electronic media. Traditional advertising methods, including will be used as well as digital and social media channels. Information will be available at community outreach events and through our channel partners. Customer engagement channels may include: Online Marketplace: SJG will launch a self-branded online marketplace to optimize the range of functionality and value for our customers. This online marketplace will be an easy to use source for the online purchase of efficient products and services. Participants will be able to purchase self-installed smart thermostats through the marketplace which will offer instant rebates, as well as a variety of other products. SJG will explore options with the vendor to ensure customer eligibility, and also the potential for validation of instore rebates for the smart thermostats with major retailers. Trade Allies: SJG has had many contractors participate in the program to date and has a strong on-going relationship with these trade allies through our training and education. SJG will ensure these contractors recognize the opportunity they have to promote this program and grow their services by offering installation service for smart thermostats. 8

64 BSG-1 Page 12 of 51 Mail or Hand Delivery: Kits may be mailed, or hand delivered to schools, or to the parents of students, as well as distributed at food bank locations. This will ease access to these measures and assure that they reach the intended customer segments. Projected Participants and Energy Savings The projected participation and savings associated with this program are summarized in the table below. All values are annual incremental totals, and do not incorporate savings achieved in prior years. Participation estimates are calculated as the sum of smart thermostat customers assuming 1.2 smart thermostats per participant, the number of general kits/measures sold through the online marketplace, and the number of kits distributed at schools through the Education program and at food banks. Savings estimates are based on projected participation during each year of the forecast period. Table 5: Residential Efficient Products Estimated Participation and Savings Program Cost Category Participants 22,917 30,000 35,833 37,083 37,333 Natural Gas Savings (therms) 759, , , , ,969 Electric Savings (kwh) 5,395,852 6,512,346 7,531,825 7,722,851 7,805,696 Electric Demand Savings (kw) Relationship to Existing Programs While NJCEP currently offers an Energy Efficiency Products Program (for clothes washers & dryers and refrigerators), they do not provide incentives for smart thermostats, water savings items, low cost weatherization products, or offered packaged conservation kits. NJCEP currently does not offer an online marketplace. This program will complement the peer utility programs and expand to include additional lowprice entry point products and rebate opportunities to make energy efficiency more accessible to a broader range of customers. Additionally, this program adds components to help meet the needs of low to moderate income customers and raise their awareness of other resources to help with their energy needs. Proposed Incentives SJG proposes to offer up to a $150 rebate for smart thermostats to reduce the upfront cost of the investment. As noted above, SJG will be considering options for midstream delivery with retailers. The incentive level for other products will be roughly 50% of the efficient measure cost, as detailed below: Low flow aerator $2.00 Low flow showerhead $11.00 Smart Power Strip (Tier 1) $16.50 Smart Power Strip (Tier 2) $

65 BSG-1 Page 13 of 51 LED Screw-in General Service Lamp $1.50 LED Nightlight $4.59 Outlet covers $0.48 Weather stripping $2.00 The kits distributed through the Education program and at food banks will be provided free of charge to recipients. SJG intends to monitor the success of this online marketplace delivery approach and may consider additional products in the future. SJG also anticipates that as products may graduate from the Emerging Technologies and Approaches (ETA) program over time, they may be included within this Residential Efficient Products program. SJG may also adjust the incentive levels available through this program in order to ensure customers can implement energy efficiency and to meet market needs. Marketing Approach SJG will use digital and social media channels as well as campaigns to promote this program and analyze results to maximize its effectiveness and marketing dollars. SJG will promote programs through internal marketing tools including bill inserts, customer newsletters, and brochures detailing how South Jersey Gas is making strides to help bring energy efficient products and services to market. Remarketing campaigns will be employed to target customers who have shown interest in our program(s) but have not yet taken action or have not had the opportunity to take further action. Finally, our community outreach specialist will work to promote all residential programs and educate our customers on energy efficiency and the programs available to assist them. SJG will also look to leverage the Residential Behavior program for warm leads into this program through both the home energy reports and online audit tool. SJG will also use targeted promotion based on intelligence gathered by other residential programs, primarily SJG s Residential Behavior, Residential Home Energy Assessment with Direct Install, and NJCEP Residential Loan/Rebate. A combination of strategies will be used to support outreach to customers. Marketing activities will include: Bill inserts, bill messages, messages, Facebook and Twitter; Brochures that describe the benefits and features of the program including application forms and processes. The brochures will be available for various public awareness events (presentations, seminars etc.); Company website content providing program information resources, contact information, online application forms, online retail store and links to other relevant service and information resources; Public relations materials; and Promotion at conferences and events used to increase general awareness of the program and distribute program promotional materials. 10

66 BSG-1 Page 14 of 51 Contractor Role SJG will conduct a Request for Proposals (RFP) to secure a vendor for the online marketplace and the potential to include a retail component for some measures, such as the smart thermostat discount. SJG will work closely with the vendor to plan and implement the online marketplace and potential retail components. To select a qualified third-party vendor, SJG will prioritize criteria including but not limited to: Experience delivering similar programs or initiatives; Features and the related potential to engage more customers; and Cost effectiveness Market Barriers The primary market barriers that are addressed by this program include: Initial Cost of Efficient Products: Relative to the market baseline, efficient equipment often carries a higher upfront cost and a lower lifetime operating cost. Purchasers often may not fully value the lifetime operating cost advantage of efficient equipment and as a result higher upfront cost is a barrier to purchasing efficient equipment. To address this barrier, incentives are provided to the customer to reduce the initial cost. Customer Awareness and Engagement: Residential customers may not be aware of the benefits of installing energy-efficient measures or even the existence of some measures, such as smart thermostats. Some customers may lack the time and resources to secure and /or install such measures. To address this barrier, SJG will educate customers on the benefits of the products available in this program through targeted marketing and ensure that incentives are easily accessible. Through outreach efforts, SJG will seek to partner with trade allies to promote program offerings, and also focus marketing, education, and outreach efforts on the trade ally community to ensure that trade allies are aware of available incentives and prepared to serve customers. SJG will seek to manage barriers to program success through a commitment to applying best practices in program design, delivery, outreach, and marketing/advertising. SJG s established customer communication channels, data, and trusted brand in the marketplace, will all be leveraged. The Company s goal is to deliver best-practice programs that identify and confront market barriers on an ongoing basis. To the extent possible, SJG will cross-promote programs to spread awareness of the range of efficiency opportunities proposed in this plan. 11

67 BSG-1 Page 15 of 51 Program Costs The table below illustrates the projected program expenditures for the program. Table 6: Residential Efficient Products Costs Program Total Administration $5,525 $128,271 $134,265 $139,144 $143,131 $147,237 $39,414 $736,988 Marketing and Sales $40,625 $393,117 $366,128 $343,982 $311,637 $277,056 $51,029 $1,783,576 Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $0 $120,000 $120,583 $120,601 $120,619 $120,638 $30,164 $632,605 $0 $2,598,980 $3,213,260 $3,617,540 $3,637,030 $3,485,520 $0 $16,552,330 $5,375 $618,121 $772,729 $614,252 $615,302 $616,384 $155,276 $3,397,440 Evaluation $3,125 $15,456 $16,024 $16,836 $17,153 $17,480 $5,172 $91,245 Total $54,650 $3,873,945 $4,622,990 $4,852,355 $4,844,873 $4,664,316 $281,055 $23,194, Residential Home Energy Assessment with Direct Install The SJG s Residential Home Energy Assessment with Direct Install (HEAwDI) program is designed to deliver residential customers with a comprehensive, independent assessment of the energy saving potential in their homes. The assessment will cost customers $49 and will be performed by a third-party contractor. The intent of the assessment is to educate and encourage customers who are good candidates for the NJCEP Residential Loan/Rebate programs to move on to tackle more comprehensive energy-efficiency investments. Customers will be educated about the incentives under those programs to support such work, including the availability of interestfree financing options to ensure that customer recognize upfront cost barriers can be addressed through the other programs in our portfolio. The assessment could include the issuance of the Department of Energy s (DOE) Home Energy Score. Developed by DOE and its national laboratories, the Home Energy Score provides home owners, buyers, and renters directly comparable and credible information about a home's energy use. Like a miles-per-gallon rating for a car, the Home Energy Score is based on a standard assessment of energy-related assets to easily compare energy use across the housing market. Since 12

68 BSG-1 Page 16 of 51 the assessment will show both the Home Energy Score under the existing conditions in the home and after the installation of the measures recommended by the comprehensive assessment, customers can start to understand that the energy efficiency expenditures can provide immediate savings but are also long-term investments. During the course of the assessment, the third-party auditors will install/provide some low-cost energy savings measures (e.g. low flow showerheads, aerators, smart power strips, LED lightbulbs) and will provide some coaching about other low/no-cost energy savings tips (e.g. changing furnace filters, use of ceiling fans). These assessments also provide non-energy benefits. The assessment will follow Building Performance Institute (BPI) health and safety checklist, including combustion safety-testing. Customers will be made aware of the potential health and safety concerns within their home (e.g. high carbon monoxide levels, ventilation situations fostering mold, back-drafting appliances) and immediate action will be taken to rectify significant conditions (e.g. natural gas leaks). At the conclusion of the assessment, all customers will have a recommended list of potential energy efficiency investments tailored to their home that they can share with contractors. SJG will be able to follow-up with both the customers and the contractors to ensure customers receive timely proposals and have the information they need to consider moving ahead with the NJCEP Loan/Rebate programs. SJG s energy consultants are available to answer questions and assist customers through the process. When a customer schedules an assessment, SJG will encourage customers to consider purchasing a smart thermostat through our Efficient Products program. Customers opting to make that purchase can have their smart thermostat installed during the assessment. Correspondingly, customers contacting SJG for information on our smart thermostat discount will be encouraged to participate in this program. Market Segment/Efficiency Targeted This program will be available to all residential customers in SJG s service territory. The efficiency target for this program will be heating and cooling (thermostats), plug load (smart strips), and water heating (low flow showerheads and aerators). Delivery Method SJG will use its brand and customer outreach to encourage customers to participate in this program. SJG also anticipates leveraging the networks of other stakeholders interested in advancing energy efficiency (e.g. local green teams, PowerSave school community members) to help raise awareness of this program. SJG will issue a RFP to retain a third-party contractor(s) to perform the home energy assessments. Projected Participants and Energy Savings The projected participation and savings associated with this program are summarized in the table below. All values are annual incremental totals, and do not incorporate savings achieved in prior 13

69 BSG-1 Page 17 of 51 years. Participation estimates are based on assumed number of assessments conducted. Savings estimates are based on projected participation during each year of the forecast period. Table 7: Residential Home Energy Assessments with Direct Install Estimated Participation and Savings Program Participants 1,250 1,450 1,650 1,850 2,050 Natural Gas Savings (therms) 116, , , , ,700 Electric Savings (kwh) 1,227,426 1,423,815 1,620,203 1,816,591 2,012,979 Electric Demand Savings (kw) Relationship to Existing Programs The Residential Home Energy Assessment with Direct Install Program will be similar to the Home Energy Assessment program currently offered by NJNG today, but also will include direct install measures. Elizabethtown Gas currently offers a Home Energy Assessment program that offers the installation of other measures (e.g. programmable thermostat). Customers within Elizabethtown Gas s program may be encouraged to participate in the NJCEP Warm Advantage or Home Performance with ENERGYSTAR programs or may be eligible for other seal-up and insulation measures outside of Home Performance with ENERGY STAR. NJCEP has a Home Performance direct install pilot in conjunction with the Home Performance Program. For a limited time, contractor may install up to nine energy and/or water saving items at no cost to customers. The direct install measures will be completed while the customer is having a contractor install energy efficient upgrades to your home through the Home Performance Program. This is not a stand-alone offer. The eligible items included are LED light bulbs, low-flow faucet aerators, and EPA WaterSense showerheads. This pilot also provides the customer with the option of having a contractor install air sealing and/or insulation in their home, with potential rebates of $500 each. Proposed Incentives The $49 assessment fee is intended to generate stronger customer interest in participating in the program and create additional leads for other programs. The measures included during the assessment will be provided at no additional cost to the customer with the exception of when a smart thermostat is paired with an assessment (this measure will receive up to a $150 rebate). Customers pairing the programs will pay the $49 assessment fee and the net per unit cost of the smart thermostat for up to two units. 14

70 BSG-1 Page 18 of 51 Marketing Approach SJG will implement a multi-pronged direct and indirect marketing campaign to promote this program. SJG will use digital and social media channels as well as campaigns to promote this program to maximize its effectiveness and our marketing dollars. Programs will be promoted through internal marketing tools, including bill inserts and other communication tools that are both traditional and digital. Remarketing campaigns will be employed to target customers who have shown interest in our program(s) but have not yet taken action or customers who have the opportunity to make additional energy saving measures. SJG also anticipates partnering with local stakeholders to promote the program. Finally, our community outreach specialist will work to promote all residential programs and educate our customers on energy efficiency and the programs available to assist them. SJG will engage customers through a variety of messages, including highlighting: the low cost of the assessment; the immediate savings from the energy savings measures; the ability to pair with the smart thermostat offer; and the use of the assessment as an objective roadmap to making their homes more energy efficient. Contractor Role SJG will conduct a RFP to secure a vendor for the Residential Home Energy Assessment with Direct Install program. SJG will work closely with the contractor to plan and implement this program. To select a qualified third-party vendor, SJG will prioritize criteria including but not limited to: Experience delivering similar programs or initiatives; Features and the related potential to engage more customers; and Cost effectiveness. Market Barriers The primary market barriers that impact this program include: Customer Awareness and Engagement: Residential customers may not be aware of the best energy efficiency opportunities for their home. This program addresses this barrier by providing an independent assessment. Up-front Cost of a Home Energy Audit: Many customers would not be interested in an assessment if the costs were more than $50. This program addresses this barrier by offering the assessment at $49, which is significantly lower than market price. 15

71 BSG-1 Page 19 of 51 Program Costs The table below illustrates the projected program expenditures for the program. Table 8: Residential Home Energy Assessment with Direct Install Costs Program Total Administration $3,657 $81,616 $94,746 $97,920 $100,670 $103,503 $27,230 $509,343 Marketing and Sales Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $15,625 $157,982 $155,794 $150,683 $140,857 $130,315 $26,986 $778,242 $0 $0 $894 $921 $948 $977 $252 $3,991 $0 $887,588 $1,029,602 $1,171,616 $1,313,630 $1,455,644 $0 $5,858,078 $7,625 $73,047 $62,677 $63,730 $64,554 $65,403 $17,194 $354,231 Evaluation $3,125 $13,035 $14,415 $14,919 $15,180 $15,447 $4,556 $80,677 Total $30,032 $1,213,268 $1,358,128 $1,499,789 $1,635,839 $1,771,289 $76,218 $7,584, Residential Retrofit Weatherization The Residential Retrofit Weatherization Program provides an opportunity for low to moderate income customers to receive no cost energy efficiency measures and upgrades. This program is intended to service customers not served by the OCE Comfort Partners Program. Income eligible customers will undergo an audit, and then receive no cost direct install measures (such as showerheads, faucet aerators, and LED bulbs) and weatherization measures (insulation, air sealing, and duct sealing). Homeowners with nonfunctional heating systems may also be eligible to receive an efficient furnace or boiler at no cost. The program will cap each project at $6,000 with an additional $1,000 cap on health and safety expenses. 16

72 BSG-1 Page 20 of 51 Market Segment/Efficiency Targeted The Residential Retrofit Weatherization Program will be available to all income qualified singlefamily and single-family attached natural gas customers in the SJG service territory. To qualify for this program, the customer s household income must range from 226% to 400% of Federal Income Poverty Level. Currently the Office of Clean Energy offers an income qualified program for customers up to 225% of the Federal Income Poverty Level. This program meets customers above this threshold. The efficiency target for this program will be heating and cooling (thermostats), plug load (smart strips), and water heating (low flow showerheads and aerators). This program also includes building envelope, home heating, and water heating measures, when necessary. Delivery Method This program will be implemented by a third party overseen by SJG staff. The program relies on the local trade ally network to identify and deliver efficiency services to customers according to the format described herein: In-Home Energy Audit and In-Home Efficiency Improvements: In-home energy audits are conducted by third party contractors retained by SJG. During the audit, customers will receive free installation of low-cost measures such as LED lighting, low-flow devices, and smart strips at no additional cost, in addition to behavioral suggestions to improve efficiency of the home and a review of thermostat setpoints. Smart thermostats will be made available at no cost while the auditors are on premises. Following the in-home audit, the participant will also be given the opportunity for additional building envelope measures to be installed at no cost. These measures include air sealing and building insulation. Also, customers with nonfunctional heating and cooling equipment will receive new equipment at no cost. Projected Participants and Energy Savings The projected participation and savings associated with this program are summarized in the table below. All values are annual incremental totals, and do not incorporate savings achieved in prior years. Participation estimates are based upon assumed number of audits conducted. Savings estimates are based on projected participation during each year of the forecast period. Table 9: Residential Retrofit Weatherization Estimated Participation and Savings Program Participants Natural Gas Savings (therms) 34,540 69, , , ,700 Electric Savings (kwh) 101, , , , ,561 Electric Demand Savings (kw) Relationship to Existing Programs This program is designed to complement the OCE Comfort Partners Program by offering a similar program to a slightly higher income segment. Finally, these customers will also receive marketing 17

73 BSG-1 Page 21 of 51 materials for additional energy efficiency and energy assistance programs offered by SJG and OCE. Proposed Incentives This program will be offered at no cost to participants, meaning SJG will provide 100% incentives. This also includes a no cost audit and up to $1,000 in health and safety related costs. The limit for each individual customer is $6,000, unless a heating system replacement is required. Marketing Approach SJG will utilize a targeted marketing approach to educate potential eligible customers about the program. These could include hard-copy materials to promote awareness among trade allies and customers. SJG also intends to pursue additional marketing opportunities through other programs such as Residential Behavior, where information garnered could be used to identify potential participants for the Residential Retrofit program. SJG will also look at customers that did not qualify for the Office of Clean Energy s Comfort Partners program that might be eligible for the Residential Retrofit program. Finally, our community outreach specialist will work to promote the program and educate customers on energy efficiency and the programs available to assist them. Contractor Role SJG will conduct a Request for Proposals to secure a vendor for the Residential Retrofit program. SJG will work closely with contractor to plan and implement this program. To select a qualified third-party vendor, SJG will prioritize criteria including but not limited to: Experience delivering similar programs or initiatives; Features and the related potential to engage more customers; and Cost effectiveness. Market Barriers The primary market barriers that impact this program include: Customer Awareness and Engagement: This program requires customers to schedule a visit for an auditor to visit their home. SJG web portal will provide customers with a list of qualified and geographically relevant trade allies that can complete the in-home audit and installation of efficiency measures to make contractor selection as easy as possible. Initial Cost of Home Weatherization: Home weatherization may be more expensive and involved than purchasing efficient equipment and therefore require more participant investment and commitment. Customers must be willing and able to invest in more expensive energy efficiency projects. Customers within this income bracket will be less likely to make these investments than most other customers. SJG will seek to manage all barriers to program success through a commitment to applying best practices in program design, delivery, outreach, and marketing/advertising. SJG s established customer communication channels, data, and brand in the marketplace will all be leveraged to deliver best-practice programs that identify and confront market barriers on an ongoing basis. To the extent possible, SJG will cross-promote programs to spread awareness of the range of efficiency opportunities proposed in this plan. 18

74 BSG-1 Page 22 of 51 Program Costs The table below illustrates the projected program expenditures for the program. Table 10: Residential Retrofit Weatherization Costs Program Total Administration $4,597 $86,656 $91,402 $94,164 $96,802 $99,518 $26,204 $499,342 Marketing and Sales Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $8,125 $91,815 $90,501 $89,189 $86,014 $82,575 $18,982 $467,200 $0 $0 $583 $601 $619 $638 $164 $2,605 $0 $756,944 $1,513,888 $2,270,831 $3,027,775 $3,784,719 $0 $11,354,157 $7,175 $67,006 $55,281 $56,046 $56,730 $57,434 $15,165 $314,836 Evaluation $3,125 $12,623 $13,106 $13,416 $13,631 $13,852 $4,145 $73,897 Total $23,022 $1,015,044 $1,764,761 $2,524,247 $3,281,570 $4,038,735 $64,660 $12,712, SJG Commercial & Industrial (C&I) Sector Programs The proposed commercial & industrial programs are designed to address the specific and unique needs of C&I customers throughout SJG s service territory. This EE Program Plan provides information on the following program: C&I Engineered Solutions The C&I Engineered Solutions Program will provide tailored energy efficiency assistance to public service entities, such as municipalities, universities, schools, hospitals, non-profit entities and multi-family facilities. The program will provide expert-guided service throughout delivery to assist customers in identifying and undertaking large energy efficiency projects on site, while requiring no up-front funding from the customer. Through this program, customers will be provided with an in-depth audit of their facilities as well as a detailed audit and recommendation of energy efficiency measures that could be economically installed. Customer incentives are determined on a project-by-project basis, and participants may select their preferred installation vendors. In addition to the calculated project-by-project incentive, 19

75 BSG-1 Page 23 of 51 participants will have the option to pay back the non-incentive portion of the project costs with interest free repayments over a period of five years, or ten years for New Jersey Home Mortgage Finance Agency (HMFA) qualified multi-family facilities. Through this program design, participants in market segments that have typically been underserved are able to achieve greater energy savings. Market Segment/Efficiency Targeted C&I public sector municipalities, universities, schools, hospitals, non-profit, multi-family entities, medical and educational facilities located within SJG service territory are eligible to participate in this program. The program will provide energy audits and incentives to entities that directly serve the public but often have difficultly investing in energy efficiency. The measures included in this program may include HVAC, building envelope, motors, lighting, controls, energy storage, and other energy consuming equipment. Delivery Method SJG will retain qualified vendors to undertake the audit and engineering services required to deliver this program. Participants will contract with their preferred installation trade allies to install the measures included in projects. The program delivery will typically occur in four steps: Audit: SJG or its selected third-party implementation contractor shall assess the required level of American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) audit to perform based on the complexity of the facility and the potential energy efficiency measures. However, an investment grade audit may not be required for all facilities. The selected SJG vendor then will perform the appropriate level energy audit and prepare a customized audit report that includes a list of recommended energy efficiency upgrades. SJG and its representatives will review the recommended energy efficiency upgrades with the customer to determine whether to proceed with a project. Engineering Analysis of Project: Based on the audit results, an engineering analysis may be required. SJG will conduct a screening of the payback and project cost effectiveness and select a set of approved energy efficiency measures for the project. The program engineering vendor will prepare bid-ready documents and work with the participant to prepare a project Scope of Work, which will be used by the customer to obtain installation cost estimates for project. Scope of Work/Contractor Bids: The participant will issue a Scope of Work to obtain bids to complete the identified and approved project. SJG, the program engineering vendor, and the participant will review and evaluate the bids/costs received and make the final decision on bid selection. Following bid selection, the proposed project is again screened for cost effectiveness and the participant is presented a funding commitment proposal from SJG. Once (i) the participant and SJG have executed the funding commitment and (ii) the installation contractor and the participant have executed applicable agreements and contracts, the first progress payment equal to approximately 30% of the installation cost can be issued to the customer to initiate the project (Stage 1 Progress Payment). Measures Installation and Inspections: SJG, its representatives, and the energy engineering vendor, acting as construction administration agent, will monitor project 20

76 BSG-1 Page 24 of 51 progress. Upon verification of satisfactory project progress, a series of Stage 2 progress payments up to 50% of total project commitment can be issued. When the project is 100% complete, a final project true-up, and final inspection will be undertaken. The final payment based on the results of project true-up is determined and issued only if the final inspection is successfully completed and approved. If the final costs are less than the estimated project commitment, the final payment will be adjusted down to reflect the actual costs. If the final costs are greater than the estimated project commitment, the final payment will not be adjusted and will be paid according to the executed agreements and contracts specifying original costs. The progress payment schedule described above is designed to ensure that building owners can pay their contractors on a timely basis. Project progress and the project cash flow will be monitored and verified by SJG or a designated third-party implementation contractor. Projected Participants and Energy Savings The projected participation and savings associated with this program are summarized in the table below. All values are annual incremental totals, and do not incorporate savings achieved in prior years. Participation estimates are based upon assumed number of facilities participating. Savings estimates are based on projected participation during each year of the forecast period. Table 11: C&I Engineered Solutions Estimated Participation and Savings Program Participants Natural Gas Savings (therms) 0 43, , , ,030 Electric Savings (kwh) 0 568,386 1,705,158 2,841,930 3,978,702 Electric Demand Savings (kw) Relationship to Existing Programs The C&I Engineered Solution Program is a broadening of the approach that PSE&G currently uses for its existing Hospital and Healthcare program and Multi-Family program into new sectors including municipalities, universities, non-profits, and schools, while continuing to offer services to the hospital, healthcare, and multi-family segments previously covered. The C&I Engineered Solutions Program is designed to reach segments of the market that have difficulty accomplishing projects through the other pathways (including existing NJCEP programs). NJCEP does not offer a similar program at this time. With respect to public school districts this program is intended to act in a complementary manner with the existing NJ Energy Savings Investment Program (ESIP) financing mechanism, while also providing an optional, alternative financing mechanism. Districts could follow an ESIP path and leverage the incentives provided through this program to allow for a larger project financed through any of the three ESIP approaches (DIY, ESCO, Hybrid). A school district developing an ESIP would utilize incentives available through the C&I Engineered Solutions Program in lieu of other traditional sources. In addition, the district would also have the option of whether to use the ESIP approach to bond or 21

77 BSG-1 Page 25 of 51 access private financing from an Energy Service Company (ESCO) for the additional ESIP costs, or to utilize the interest-free financing provided by the SJG C&I Engineered Solutions Program. Proposed Incentives The program will provide a 100% incentive for an up-front ASHRAE Level I, II, or III audit. The specific audit level will be determined based upon the type, size, and age of the facility. In addition, SJG will buy-down the simple payback of the recommended energy efficiency project cost for approved measures up to six years, with the resulting payback not less than three years. After the project incentive buy-down, the remaining project costs may be funded by the program with participants repaying the balance of the project costs interest-free over time. SJG will retain the option and flexibility to adjust the incentive offered to participants to enable a whole-building approach that will include additional energy efficiency measures in the project. The full cost of the energy efficiency projects, including engineering, transaction costs and cost of construction, will be covered through a combination of program incentive and customer repayments. Marketing Approach SJG will leverage existing relationships with municipalities, universities, schools, and other public agencies to promote the program and will conduct further outreach through school, university, and municipal associations. In addition, SJG will work with hospitals, healthcare facilities, non-profits, and multi-family agencies to increase awareness of the program. The program will leverage SJG s existing relationships and communication channels with customers. Contractor Role SJG will select qualified program participating vendors to undertake all auditing and engineering work associated with the program. Participants are permitted to select their preferred installation contractors to complete work on site. SJG may also take on a third-party implementation contractor to assist in the outreach, marketing, and trade ally coordination, to support the large number of municipalities and schools within the SJG service territory. Installation contractors, as selected by the participants, must adhere to the project specifications as developed by SJG and the engineering vendor, and as approved by the participant. SJG will leverage trade allies to support the program, including local construction, electrical, plumbing, and other contractors to educate them on program benefits and assist with building a network of trade allies which will reliably install energy efficient equipment for participating customers. The third-party implementation contractor may also monitor participation to assess the effectiveness of outreach efforts, incentive levels, delivery methods, and trade ally availability to provide suggestions to ensure that the program is continually providing SJG customers with their needs. To select a qualified third-party implementation contractor, South Jersey Gas will prioritize criteria including but not limited to: Experience delivering similar programs or initiatives; Resources and marketing strength; and Cost effectiveness. 22

78 BSG-1 Page 26 of 51 Market Barriers The primary market barriers that impact this program include: Business/Operational Constraints: Municipalities, universities, schools and hospital facilities often have unique operational constraints that act as a barrier to efficiency projects from being implemented. This barrier will be addressed by ensuring that the program operates cooperatively with participants, provides technical assistance, and offers timely incentives and financing support. Customer Awareness and Engagement: Eligible participants in the municipalities, universities, schools and hospital facilities market may be unaware of energy efficiency opportunities and programs because the segment has historically not been well served by traditional demand side management (DSM) programs. To address this barrier, this program was designed specifically to support the municipalities, universities, schools and hospital facilities segment. SJG will execute a targeted outreach strategy to ensure that relevant customers are aware of program opportunities and consider energy efficiency in equipment investments and long-term planning. The program will also prepare and distribute successful case studies of prior participants and their experiences and energy savings. Cost Effectiveness: Efficiency upgrades require an initial investment that is recovered by lower long-run operating costs and non-energy benefits. Municipalities, universities, schools and hospital facilities projects often carry longer payback periods than traditional DSM projects due to the unique needs of the segment (e.g. hospital & health buildings). To address this barrier, incentives and financing is provided to the customer to reduce the initial cost, and SJG will endeavor to communicate the non-energy benefits offered by many efficiency upgrades that are not well captured in traditional cost/benefit analysis. SJG will seek to manage all barriers to program success through a commitment to applying best practices in program design, delivery, outreach, and marketing/advertising. SJG s established customer communication channels, data, and brand in the marketplace will all be leveraged to deliver best-practice programs that identify and confront market barriers on an ongoing basis. To the extent possible, SJG will cross-promote programs to spread awareness of the range of efficiency opportunities proposed in this plan. 23

79 BSG-1 Page 27 of 51 Program Costs The table below illustrates the projected expenditures for the program. Table 12: C&I Engineered Solutions Costs Program Total Administration $6,866 $179,596 $184,684 $190,132 $195,536 $201,102 $52,709 $1,010,624 Marketing and Sales Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $10,000 $141,424 $140,062 $140,162 $138,439 $136,496 $30,102 $736,685 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $899,867 $2,699,602 $4,499,337 $6,299,072 $0 $14,397,878 $5,000 $55,112 $56,465 $58,917 $65,166 $75,714 $139,433 $455,807 Evaluation $5,000 $25,037 $25,488 $26,057 $26,539 $27,035 $7,886 $143,043 Total $26,866 $401,169 $1,306,567 $3,114,869 $4,925,016 $6,739,418 $230,131 $16,744, SJG Research & Development and Other Sector Programs The proposed research & development and other programs represent innovative ideas meant to test new technologies and processes of attaining energy savings, and therefore the quantifiable savings of the pilot programs cannot be ascertained. Because of the novelty of these pilot programs, compliance with MFR Part V would not be feasible. The pilot programs are cutting-edge, and lack easily produced documentation supporting estimated costs/benefits. In addition, some of these pilot programs have an educational rather than equipment-based focus. Because of this, the pilot programs described below should be exempt from the requirements set forth in MFR Part V. This EE Program Plan provides information on the following programs: Emerging Technologies and Approaches; and Education 24

80 BSG-1 Page 28 of Emerging Technologies and Approaches The purpose of the Emerging Technologies and Approach (ETA) Program is to evaluate, demonstrate, and deploy the next generation of technologies and customer engagement approaches, promote economic development in New Jersey, and coordinate research and development (R&D) activity and lessons learned with all utilities in New Jersey. The ETA program is proposed as a pilot due to the experimental and supporting role it will play in SJG s energy efficiency efforts. By supporting the development and widespread adoption of advanced energy efficiency technologies and customer engagement approaches, this pilot will support statewide goals for efficiency and greenhouse gas (GHG) reductions. The pilot accomplishes these tasks through a collaborative research, reporting, and review process with committee of utility, government, trade ally, and other stakeholders. Primary objectives of the ETA program include: Provide field-tested insights into new energy efficiency programs and technologies that facilitate energy savings for residential, commercial, and industrial customers; Provide support to innovators, researchers, and product developers by evaluating, demonstrating, and promoting their energy efficiency technologies; Continually identify, evaluate, and support promising technologies that can then be added to future energy efficiency programs (and the market); and Support the successful deployment of new technologies through case studies and marketing materials, contractor training events, contractor and customer recruitment, and other activities. The ETA program is designed to be an ongoing effort to identify and support emerging technologies that can provide large scale energy savings for New Jersey utility customers in future years. Emerging technologies are those that meet some or all of the following criteria: Development phase; Early commercial availability; Unproven in commercial setting; Low market penetration; and Require business model innovation. While there is significant energy efficiency potential for New Jersey with current technologies, New Jersey must continue to develop and deploy new technologies, approaches, and offerings to meet New Jersey s long-term clean energy goals. R&D must be used to determine how new technologies and emerging engagement strategies can be promoted on a large scale. The ETA program will involve numerous activities to identify, evaluate, demonstrate, and deploy new energy efficiency technologies and implementation approaches for SJG s programs. These activities may include: Conducting measure scans to identify technologies under development by other utilities, national laboratories, R&D organizations, manufacturers, and others, and implementing a proof-of-concept pilot with SJG customers 25

81 BSG-1 Page 29 of 51 Developing business cases for promising technologies that include information such as: unit energy savings, installed cost, incremental cost, lifetime, cost-effectiveness, applicable market sizes, available manufacturers, potential incentive levels, program design strategies, etc. Performing laboratory testing or field demonstrations to collect energy savings and other data to validate performance; Conducting market research to include surveys, focus groups, interviews, and due diligence reviews of potential new third-party implementation firms to understand the attractiveness and suitability of the new technology or service for customers, trade allies, and other New Jersey stakeholders Conducting program pilots where the technologies or service delivery innovations are offered to select groups of customers to measure performance on a wider scale, in preparation for a full program offering Educating contractors and other stakeholders by conducting on-line or in-person training events, and preparing marketing materials such as case studies, program brochures, and frequently-asked-question (FAQ) documents The ETA Program will operate with a rolling process of identifying and pre-qualifying pilot research activities and implementing and evaluating results. SJG will look to partner with peer utilities in New Jersey to achieve operational efficiency and improve the energy efficiency offerings of all programs across the State. The ETA program should be exempt from the requirements set forth in MFR Part V because it is experimental and is testing approaches that are proposed for commercialization, thus the total benefits cannot be estimated at this time. Market Segment/Efficiency Targeted This program will address promising efficiency technologies and delivery strategies that will impact SJG, and ultimately all customers in all sectors across New Jersey. The list of technologies and delivery approaches to be tested in the R&D program will evolve over time and react to changes in the marketplace, advances in new technologies, and customer engagement strategies that are determined to be potentially commercially viable and ready for testing. Delivery Method SJG will administer the ETA program with third-party implementation contractors with support from SJG staff and other stakeholders (e.g., other New Jersey utilities, university researchers, technology developers, trade allies, customers, and others). SJG will also consider New Jersey universities, colleges and other utilities as key implementation partners. The ETA program will involve collaboration between several groups: an ETA program facilitator, participating utilities, and stakeholder advisory committee (SAC). Table 14 describes the anticipated structure and roles for the program. 26

82 BSG-1 Page 30 of 51 Table 13: Key ETA Program Collaborators and Responsibilities ETA Member(s) Key Responsibilities Program Group ETA Facilitator Participating Utilities Third party implementation contractors SJG staff and other participating New Jersey utilities Lead technical and market research, engineering analysis, program design, and other activities which lead to identification of the R&D opportunities Design the research project and contracting through a competitive process with vendors to finalize and propose an implementation plan that will test different R&D approaches to advancing the program goals. Convene focused meetings for more in-depth review of particular programs or new technologies Issue meeting agendas and supporting materials at least one week in advance Invite participation of subject matter experts (SME) as necessary, including manufacturer representatives, industry associations, and potentially DOE/EPA representatives Serve as a central online repository for all ETA Program reports and SAC minutes Help recruit additional SAC members if gaps identified Leverage Clean Energy Learning Center for training for ETA Program ready for broader market adoption Provide the initial proposals for ETA Program Fund approved programs Recruit customers and contractors for ETA programs Execute broader customer and contractor outreach strategies for ETA program Work with ETA Facilitator to develop agendas for all SAC meetings Help recruit additional SAC members if gaps identified Share insights from participation in national/regional organizations Prepare Quarterly Progress Reports for programs in process to be reviewed with SAC Prepare final ETA program reports for programs and technologies that have completed testing and review. Disposition options addressed further in this proposal Draft annual budgets, program activities and related milestones, in consultation with ETA Facilitator, for SAC review and discussions Fund independent evaluation 27

83 BSG-1 Page 31 of 51 Stakeholder Advisory Committee (SAC) Stakeholders Members expected to be active participants in meetings and provide feedback if unable to participate Member input is expected to ensure ETA programs have properly considered training needs, outreach plans, likely market acceptance, potential market barriers, etc. Members encouraged to share additional research about technologies and program approaches as identified SAC members may include representatives from utilities, researchers and other parties. from New Jersey colleges and universities, NJCEP Program Administrator, Office of Clean Energy Staff, Rate Counsel, NJEDA and/or Heldrich Center, NJACCA, Eastern Heating & Cooling Council, NJBIA, Additional SMEs may be invited to participate for particular meetings, including contractors and customers participating in ETA projects As noted in the responsibilities chart, activities within this program will establish a regular review of new technologies and approaches and review progress through quarterly and annual reports. The following section outlines the review and reporting process: Utilities propose new technologies and approaches for consideration, including a characterization for its current status (e.g., early stage development, late stage testing, deployment support), and potential activities Each utility will work closely with the ETA Facilitator to schedule overview sessions for the SAC members to establish a baseline understanding of the initial programs Each participating utility shall prepare Quarterly Progress Reports for each program. These reports are intended to serve as Executive Summaries of program status to facilitate discussion with the SAC members. Each Quarterly Progress report will address: o Recap of program objectives o Overview of relevant activities conducted in that quarter which may include the following based upon the status of the project, as appropriate: Updates on collaborative research funding; Updates on customer/contractor recruitment; Result from testing; Identification of market barriers; Efforts to address market barriers; Identification of training needs; Training Metrics participation and feedback; Participation and performance metrics; Unforeseen challenges; Additional research/testing needs identified; and Refinements in program approach o Funds expended to date o Status of milestones 28

84 BSG-1 Page 32 of 51 Each participating utility shall prepare a Final Report for each technology and approach included in ETA. Final reports are intended to address whether the technology or approach should continue in the program (e.g., move from lab testing to field testing), move directly into existing approved EE Programs, or might not be worth further pursuit at this time (e.g. more promising technologies or programs identified or overwhelming market barriers). Each Final Report will address: Recap of program objectives Overview of relevant activities conducted during the entire project, which may include the following, as appropriate: o Outcomes of collaborative research funding; o Customer and contractor feedback; o Result from testing; o Identification of market barriers/unforeseen challenges with proposed remedies; o Identification of training needs with proposed workplan; o Training metrics participation and feedback; o Updates on customer/contractor recruitment; o Participation and performance metrics; o Customer and contractor feedback; o Identification of on-going training needs with proposed workplan; and o Marketing and outreach plan Funds expended to date Rationale for disposition Projected Participants and Energy Savings Given the uncertainty regarding the measures to be developed and deployed and the need to further study this innovative offering in a pilot setting, no specific participation or savings estimates are available at this time. The collaborative parties will implement a robust Evaluation, Measurement, and Verification (EM&V) process and impact evaluation to assess customer satisfaction, lessons learned, energy savings, and financial efficiencies that are realized. This process may ultimately contribute to the development and design of full-scale program offerings. Relationship to Existing Programs To our knowledge, no other New Jersey utility or state-run program is currently offering an R&D program as proposed in this plan, but these organizations may be planning similar activities for future years. The goal of the ETA program is to continually identify, evaluate, and support promising technologies or innovative implementation approaches to contribute to SJG s energy efficiency programs in future years. In this way, the final output is an information package that SJG s energy efficiency programs will use to design and implement new or enhanced programs for customers. Lessons learned and summary reports from the ETA program will be made available to the public, such that all efficiency stakeholders (i.e. vendors, trade allies, other New Jersey utilities, and ultimately customers) can benefit from the experience of SJG. However, SJG anticipates partnering with peer utilities in New Jersey to develop a comprehensive ETA program that will achieve state-wide efficiencies and benefit all residents of New Jersey. 29

85 BSG-1 Page 33 of 51 Proposed Incentives The ETA program will target new technologies that offer natural gas and/or electricity savings for residential, commercial, and industrial customers in New Jersey. The program would not provide direct incentives to customers, with the possible exception for a technology demonstration at a customer site. In these situations, the program may provide financial or in-kind support to the customer and/or demonstration partners, including: Energy efficiency rebate based on expected energy savings, similar to custom calculated measures; Direct funding to a manufacturer, contractor, or host site to offset technology equipment or installation cost; and In-kind support, such as use of monitoring equipment, staff time for data collection and analysis, report preparation and promotion, etc. Marketing Approach The ETA is not intended as a customer-facing program. Where necessary, the ETA program may conduct demonstrations at customer sites and recruit participants through the following methods: Recruit SJG employees to volunteer; Recruit customers to participate directly via social media, website, etc.; Notice on SJG website, marketing, or direct mail; Coordination with SJG account executives; Recruitment by pilot applicants; and Cooperation with trade allies who may already have a project in development at a customer site. Contractor Role SJG will administer the ETA program with a combination of dedicated staff and a project management third-party implementation contractor, such as the ETA Facilitator. SJG s role will be to ensure the major milestones are met and to coordinate with various departments (e.g., engineering, programs, marketing, strategy, IT, etc.) to gather input during the process. As the ETA Facilitator, the third-party implementation contractor will provide support through overarching program management. This will include recruiting and developing a vibrant thirdparty stakeholder advisory committee, described above. Market Barriers The ETA program is designed to identify and support emerging technologies and approaches that SJG could add to energy efficiency programs in future years. Emerging technologies face a large number of market barriers that inhibit wider adoption, including: high upfront cost, long customer paybacks, lack of third party validation, unfamiliarity by trade allies and customers, uncertain installation, operation, and maintenance practices, conflicts with state and local building codes, limited market availability, and other challenges. The ETA program will provide highly targeted support to emerging technologies to overcome these market barriers. The primary market barriers that the ETA program will address include: 30

86 BSG-1 Page 34 of 51 Identifying New and Improved Products: Efficiency programs need to continually find new and improved efficient products and service delivery approaches to improve program performance. As the market evolves, and technologies that required incentive become commonplace, SJG should focus on advancing efficiency gains in new product areas. The ETA program will provide SJG the focused space and resources to systematically design and deploy a carefully structured process to continually identify, test, validate, and promote the adoption of new efficient products and service delivery approaches. Sufficient Stocking and Availability of Efficient Products: Emerging technologies are often unavailable, due to retailer/ distributor failure to stock and service the new products. The ETA Program will raise awareness and engage the New Jersey marketplace with information and case studies about the new technologies that are proven, by deployment test studies, to be high value additions to the efficiency program. The ETA Program will invest resources to familiarize trade ally partners of all types with the advantages of embracing and promoting to customers the new technologies. Customer & Trade Ally Awareness and Engagement: Customers and trade allies may not be aware of the benefits of installing new and relatively unknown efficient equipment and/or lack the time and resources to experiment themselves with emerging efficient equipment when replacing existing equipment. To address this barrier, SJG s ETA Program will implement product testing in New Jersey homes and publish and widely make available case study findings from customer experiences with the new technologies. Through outreach efforts SJG will seek to partner with retail and wholesale entities to promote and deploy for the market these new emerging technologies once proven to be highly reliable and well received in the early trials. SJG will seek to manage all barriers to program success through a commitment to applying best practices in program design, delivery, outreach, and marketing/advertising. SJG s established customer communication channels, data, and brand in the marketplace will all be leveraged to deliver best-practice R&D initiatives that identify and confront market barriers on an ongoing basis. 31

87 BSG-1 Page 35 of 51 Program Costs The table below illustrates the projected expenditures for the program. Table 14: Efficiency ETA Program Costs Program Cost Category Total Administration $2,450 $111,232 $115,426 $118,836 $122,327 $125,921 $32,656 $628,849 Marketing and Sales Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $3,440 $80,683 $81,218 $81,300 $81,130 $80,881 $24,450 $433,102 $0 $0 $233 $240 $247 $254 $66 $1,040 $0 $0 $1,600,000 $1,600,000 $1,600,000 $1,600,000 $0 $6,400,000 $1,250 $31,412 $32,745 $33,664 $34,599 $35,561 $9,388 $178,618 Evaluation $1,250 $12,137 $12,543 $12,856 $13,166 $13,486 $3,704 $69,142 Total $8,390 $235,464 $1,842,164 $1,846,896 $1,851,469 $1,856,105 $70,264 $7,710, Education SJG plans to partner with the Alliance to Save Energy (ASE) to facilitate their PowerSave Schools Program. ASE s PowerSave program empowers students to grow as leaders, apply academic knowledge to solve the real-world challenge of increasing utility bills, and move their schools and communities toward a greener future with energy efficiency practices and measurable energy savings. The program fosters energy literacy, raises student awareness of workforce development opportunities, drives energy savings at schools, and promotes home energy awareness. ASE has experience working with utilities to provide energy efficiency education free-of-cost to schools, reaching over 250,000 students across the nation since The program will also distribute home energy efficiency kits to students whose families have demonstrated an interest and commitment to pursue energy savings. The measures included in the kits are low flow aerators and shower heads, LED bulbs, smart power strips, and energy education savings tips. The kits allow students to take energy savings knowledge and apply it at home, saving energy and money. 32

88 BSG-1 Page 36 of 51 The core objectives for the program are as follows: Foster energy literacy and environmental stewardship within the school community: SJG will partner with ASE to educate schools in SJG s service territory for each academic year beginning with the school year to promote energy literacy through lesson plans, activities and competitions. Students will conduct assemblies, classroom audits and presentations, school-wide competitions and behavior-change campaigns reaching their whole school communities administrators, staff, and students and their families. Provide students with experiential learning and professional development opportunities: All participating students will receive leadership opportunities, allowing them to develop critical-thinking skills, public speaking skills and practical experience in the energy field. Promote awareness about home energy efficiency in students households: Students parents and families will gain awareness about energy efficiency, have their homes assessed by students for efficiency opportunities, and at their request receive home energy efficiency kits to implement in their households. Data on kit implementation will be gathered through surveys gathered as part of a program-wide, student-led home outreach competition. Drive measurable energy savings through student-led behavior change: A primary focus of PowerSave is to train students to identify energy-savings opportunities in their classrooms and schools, and give them the analytical and communications skills to present data-based energy savings recommendations to their teachers and peers. ASE will retain a third-party energy tracker who will gather historical energy data from each site to establish a baseline. During the period of program implementation, schools will receive monthly energy reports comparing current energy use (normalized for weather and adjusted for major changes in energy use, where necessary) against their baseline energy use. These data allow students to monitor the success of their efforts and identify opportunities for further gains. Schools savings will be highlighted through a program-wide competition. The historical savings observed through the PowerSave program is 5-15% in other parts of the country. SJG is seeking an exemption from Part V. of the Minimum Filing Requirements for the costs to administer the PowerSave program since the primary focus of this program is education based and savings are not easily estimated. SJG will, however, include the cost and benefits associated with the conservation kits in the cost benefit analysis for the Residential Efficient Products program. Market Segment/Efficiency Targeted The target market for this program is residential customers in the SJG service territory. The primary focus of this program is energy education for K-12 schools, but it also targets behavioral changes in these schools. Specifically, students test lighting levels, thermal variances in classrooms, and behavioral practices with classroom equipment (e.g. smartboards, chromebook charging carts). 33

89 BSG-1 Page 37 of 51 By connecting the educational efforts with outreach to families of the students, SJG has the opportunity to capture additional energy savings through the distribution of energy saving kits. More importantly, it provides an opportunity to reach more customers to raise awareness of deeper retrofit programs and potential energy efficiency and energy assistance programs that serve low to moderate income customers. Delivery Method SJG will contract directly with ASE to run the PowerSave Program. ASE will hire local project leaders to administer the program and provide the appropriate level of support to the staff at participating schools and to engage directly with the PowerSave student team at each school. ASE will sub-contracted with Utility Management Services (UMS) to gather historical electrical and/or natural gas use data, establish baseline energy performance, implement a routine data sharing mechanism, normalize the data for weather and share the results with schools and SJG so progress can be tracked. SJG will work with ASE to assess the appropriate delivery method of kits to students and their families. Projected Participants The projected participation associated with this program is summarized in the table below. All values are annual incremental totals, and do not incorporate participation in prior years. Participation estimates are calculated as the expected number of schools participating in the program. In addition, SJG expects to distribute approximately 200 kits per school. Savings estimates are not available as this program is educational in nature. Savings for educational kits are not shown here because they are included in the Residential Efficient Products program. Table 15: Education Program Estimated Participation Program Participants Natural Gas Savings (therms) Electric Savings (kwh) Electric Demand Savings (kw) Relationship to Existing Programs New Jersey Natural Gas currently runs a PowerSave Program for a limited number of schools. That version of the program provides fewer resources to participating schools and does not include the energy monitoring component or the conservation kits for families. SJG expects New Jersey Natural to continue this program. NJCEP has not offered an educational program since the Teaching Energy Awareness with Children s Help (TEACH) was eliminated in

90 BSG-1 Page 38 of 51 Proposed Incentives Participating schools will receive all tools, curriculum, resources and local project leader support at no cost. They also have the opportunity to earn a modest stipend for completion of certain milestones. Certain students will also receive kits at no cost containing small equipment and literature to further promote energy efficiency at home. Marketing Approach Schools that are participating in the Sustainable Jersey for Schools program have an added motivation of being able to earn points for participating in this program. SJG intends to partner with Sustainable Jersey on initial outreach to schools through an advance registration period. Marketing for this program would primarily be through Sustainable Jersey newsletters, posting on the Sustainable Jersey website, and outreach to the regional Sustainable Jersey hubs within our area. ASE will also plan to conduct direct outreach through New Jersey based school conferences (E.g. NJ School Boards Association Annual Workshop, NJEA Conference, Association of New Jersey Environmental Educators). SJG will allow public schools not participating in Sustainable Jersey and private schools within our territory to participate as well. Marketing for this period would be through press releases and use of SJG social media and traditional utility communication channels. Contractor Role South Jersey Gas intends to contract with the Alliance to Save Energy to implement this program. SJG will also competitively source the conservation kits through an RFP process. While there is no direct role anticipated for local contractors, many schools conduct green fairs that could represent an opportunity for contractors to exhibit. Market Barriers The primary market barriers that are addressed by this program include: Lack of time and resources to teach energy education: Many educators are overwhelmed by demands teaching required curriculum and don t have the time to identify strong supporting resources for energy education. PowerSave addresses this barrier by providing a PowerSave flash drive at the beginning of the school year, which contains a grade-banded Road Map Guide that provides the framework for delivering lesson plans and activities through the year. Each lesson plan is accompanied by a flipped lesson plan, with videos that can be used as a teaching tool. On-going support from the Local Project Leader also helps keep teachers engaged and motivated. Awareness of Energy Usage with Schools: Classroom occupants may have no idea how their actions influence the school s energy usage. Traditionally, there is no formal method for sharing feedback with the broader school community. PowerSave addresses this barrier by having the student lead the classroom audits. They frequently identify issues that can generate immediate energy savings (e.g. turning off some lights in overlight classrooms) or some that may require changes in other behavioral practices (e.g. using a timer on Chromebook charging stations). Further, the creation of an energy usage benchmark and on-going feedback on performance will also reinforce the importance of their actions. 35

91 BSG-1 Page 39 of 51 Program Costs The table below illustrates the projected expenditures for the program. Table 16: Education Program Costs Program Total Administration $1,637 $26,190 $26,901 $28,152 $28,921 $29,714 $7,883 $149,397 Marketing and Sales Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $16,250 $144,733 $133,047 $124,685 $111,428 $97,267 $10,794 $638,203 $0 $0 $0 $0 $0 $0 $0 $0 $0 $400,000 $600,000 $800,000 $800,000 $800,000 $0 $3,400,000 $1,250 $10,089 $10,316 $10,810 $11,059 $11,316 $3,145 $57,986 Evaluation $1,250 $4,023 $4,069 $4,376 $4,432 $4,490 $1,387 $24,027 Total $20,387 $585,034 $774,332 $968,022 $955,840 $942,787 $23,209 $4,269, NJCEP Loan/Rebate Programs The proposed NJCEP loan/rebate programs are designed to support the current programs offered by NJCEP with loans, and in some cases, additional rebates. This EE Program Plan provides information on the following programs: NJCEP Residential Loans/Rebates o HVAC o Home Performance with Energy Star NJCEP Commercial Loans NJCEP Residential Loans/Rebates - HPwES/HVAC SJG will continue to support the NJCEP Home Performance with ENERGY STAR (HPwES) and COOLAdvantage and WARMAdvantage (HVAC) programs through loans, rebates, and marketing efforts. SJG will leverage existing utility communications channels and conduct marketing and outreach campaigns to help raise awareness for both programs, as well as offer select rebates and loans in lieu of the standard NJCEP financing. 36

92 BSG-1 Page 40 of 51 The HPwES program will promote the whole house approach to energy efficiency and the availability of incentives through NJCEP s HPwES program, while providing the option for interest-free and low-cost financing to participants to reduce the up-front cost of installing energy efficient equipment in their homes. The HVAC Incentives program will encourage customer investment in high-efficiency equipment. SJG will offer incentives to customers installing qualifying high-efficiency gas furnaces/boilers, combination (heat and hot water) units, water heaters, and qualifying air conditioning systems when combined with one of these gas measures. To continue to educate customers about the other energy saving opportunities for their home, SJG will continue to require customers to participate in a no-cost home energy assessment audit conducted by SJG following the installation of equipment. The assessment conducted by SJG will identify additional energy-saving opportunities, and customers will be encouraged to move forward with additional whole-house energy efficiency projects. SJG plans to provide customers their DOE Home Energy Score. Equipment eligibility will continue to align with the requirements of NJCEP s program (or appropriate successor should NJCEP modify its program). SJG will offer customers the option of an up-front rebate or interest-free financing of program costs. Customers will still be able to participate in the WARM and COOLAdvantage to attain rebates from NJCEP programs. Market Segment/Efficiency Targeted The program will serve residential customers by promoting the installation of high-efficiency equipment and other whole-house energy conservation measures through opportunities identified in the required assessment. The program will be targeted to residential customers seeking comprehensive solutions to equipment upgrades, to customers with comfort issues within their homes, as well as many customers that have completed the Residential with Direct Install Program. Additionally, customers who have recently upgraded their equipment will be targeted for additional energy saving measures including insulation and seal-up. This program targets whole home retrofits and covers a variety of residential measures including building envelope, heating, and cooling. Delivery Method SJG will assist NJCEP in generating leads for this program through its existing relationship with customers and the trade ally community. SJG will contract with third party auditors with BPI certification to perform the required home energy assessment. Customers can use any contractor they choose for project installation, but if they wish to access the interest-free financing they may only use a contractor that is a South Jersey Gas Participating Contractor. Projected Participants and Energy Savings The projected participation and savings associated with this program is summarized in the table below. All values are annual incremental totals, and do not incorporate savings achieved in prior years. Participation estimates are based upon the expected number of participating customers in the HPwES and HVAC programs either taking loans or rebates from SJG. Savings estimates are based on projected participation during each year of the forecast period. 37

93 BSG-1 Page 41 of 51 Table 17: NJCEP Residential Loans/Rebates Estimated Participation and Savings Program Participants 1,450 2,050 2,500 2,900 3,200 Natural Gas Savings (therms) 249, , , , ,045 Electric Savings (kwh) 761, ,745 1,217,765 1,381,550 1,522,035 Electric Demand Savings (kw) ,124 1,241 Relationship to Existing Programs This program aligns with the NJCEP HPwES and WARM and COOLAdvantage programs and encourages stronger participation by making expensive high efficiency equipment more accessible to all customers through either supplemental rebates or financing. This program is identical to what SJG currently offers in support of NJCEP s HPwES and WARM and COOLAdvantage programs for any qualified project where the customer meets certain credit criteria. Currently, utility financing is only available for Tier 3 projects. The approach for HVAC is a slight modification to the existing approved programs for NJNG with the connection to a home energy assessment. Elizabethtown Gas offers supplemental HVAC rebates, but it does not include any requirement for a home energy assessment. Proposed Incentives SJG will continue to offer the prevailing NJCEP HPwES financing component as a utility financing option. SJG will offer participants the option of either up to a $10,000 loan at 0% interest with a 7-year maximum term or up to a $15,000 loan at 4.99% interest with a 10-year maximum term. SJG proposes the following new supplemental rebate incentives for qualifying furnaces (Minimum 95% AFUE) and boilers (Minimum Hydronic 90% AFUE). SJG also proposes increasing the current Boiler with Indirect and/or Combo Unit (90% AFUE), or the simultaneous installation of qualifying furnaces (Minimum 95% AFUE) and water heating systems (.64 or greater UEF), rebate from $500 to $600. This increase is being requested in order to address increased total equipment costs. Incentives are available only after completion of the required home energy assessment: Furnace (Minimum 95% AFUE) $500 Boiler (Minimum Hydronic 90% AFUE) $500 Boiler with Indirect and/or Combo Unit (90% AFUE) $600 Or Furnace (Minimum 95% AFUE) with the simultaneous installation of a qualifying Water Heating system (.64 or greater UEF) To ensure the up-front cost is not a barrier for customers, SJG will offer customers the option to apply for interest-free financing in lieu of these SJG rebates. SJG proposes to allow customers to finance up to $14,000 for a qualifying HVAC system or boiler. These projects can also include a 38

94 BSG-1 Page 42 of 51 qualifying air-conditioning system if installed with an accompanying qualifying gas measure. All projects will be subject to an overall cap of $14,000. All financing agreements will be net of the value of any NJCEP rebates. All financing agreements through this program will be a 0% Annual Percentage Rate (APR) for a seven year term. SJG recognizes that the equipment covered, minimum efficiency requirements, rebate values, and even the name of the program itself may change as NJCEP implements changes to align with the anticipated Strategic Plan. The intention within this program is to offer incentives and the financing options for any whole house program that NJCEP may offer and for any prescriptive existing homes program that NJCEP runs, including both the single measure and bundled approach. Marketing Approach SJG will continue to encourage customers to take a more comprehensive look at energy efficiency throughout their residence, utilizing the whole-house method through the HPwES program, as well as select heating and cooling needs through the HVAC program. SJG employs a variety of channels and methods to educate customers on the benefits of energy efficiency, including working through multiple communications channels. The program utilizes our SJG website to promote and educate customers on the availability of incentives for installing energy efficient equipment in their homes. SJG will continue to use digital and social media channels as well as campaigns to promote this program and analyze results to maximize its effectiveness and our marketing dollars. Traditional marketing venues such as direct mail and advertising will be used as necessary. Relationships with our existing channel partners including realtors and contractors will be fostered while we explore and develop new channel partners who can promote our programs. Remarketing campaigns will be employed to target customers who have shown interest in our program(s) but have not yet taken action or those customers who have additional opportunities. Finally, our community outreach specialists will work to promote all residential programs to educate our customers on energy efficiency and the programs available to assist them. SJG will continue to target homeowners at or close to the time they are making decisions about new heating and cooling equipment, and will continue to engage HVAC contractors in promoting the program. The program will continue to be marketed in a manner that encourages a change to high-efficiency equipment linked with the implementation of whole-house improvements. SJG will work cooperatively with various entities, including community groups, our trade allies (local contractors, supply houses, and the realtor community) to coordinate with other grass roots efforts. Contractor Role SJG will continue to allow all contractors participating in the NJCEP HPwES program to offer the financing feature to their customers. These contractors will be able to access all HPwES leads generated from both the Residential Home Energy Assessment with Direct Install program and from the required audit from the HVAC incentives program. To access those leads, contractors must commit to not charging customers for any additional audit testing work. Customers can use any contractor they choose for the installation of the HVAC equipment but if they wish to access SJG financing they may only use a contractor that has completed the mandatory overview training on program requirements. 39

95 BSG-1 Page 43 of 51 Market Barriers The primary market barriers that impact this program include: Initial Cost of Energy-Efficient Equipment: High efficiency equipment is more expensive and involved than purchasing standard equipment and therefore requires more participant investment and commitment. Customers must be willing and able to invest in more expensive energy efficiency projects. Without significant incentives customers are likely to opt for standard equipment to secure the lower up-front cost despite the longerterm benefits to them and to society. In addition to incentives, financing will be available to customers to reduce upfront cost barriers; Customer Awareness and Engagement: Residential customers may not be aware of the best energy efficiency opportunities for their home or how to get the information and resources they need. This program addresses this barrier by informing and educating customers through our multiple communication channels including our community outreach program; and Trade Ally Awareness and Training: To meet the participation goals set forth for this program, trade allies must be available to undertake the work and be interested in marketing high-efficiency equipment to customers. A lack of viable trade allies could result in customers not installing energy efficiency measures. SJG will continuously work to train and develop our local contractor network to ensure that a high-quality network of contractors is available to serve program participants; SJG will seek to manage all barriers to program success through a commitment to applying best practices in program design, delivery, outreach, and marketing/advertising. SJG s established customer communication channels, data, and brand in the marketplace will all be leveraged to deliver best-practice programs that identify and confront market barriers on an ongoing basis. To the extent possible, SJG will cross-promote programs to spread awareness of the range of efficiency opportunities proposed in this plan. 40

96 BSG-1 Page 44 of 51 Program Costs The table below illustrates the projected expenditures for the program. Table 18: NJCEP Residential Rebate/Loans Estimated Costs Program Total Administration $18,806 $417,382 $464,538 $483,786 $497,924 $512,487 $133,122 $2,528,044 Marketing and Sales $144,159 $1,397,458 $1,314,482 $1,248,270 $1,130,090 $1,003,740 $192,535 $6,430,734 Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $0 $0 $8,752 $9,015 $9,285 $9,564 $2,463 $39,080 $0 $10,587,400 $13,976,800 $17,623,100 $19,869,500 $22,467,400 $0 $84,524,200 $33,730 $930,053 $893,139 $944,050 $997,991 $1,058,699 $1,701,016 $6,558,677 Evaluation $6,410 $39,383 $44,566 $48,371 $49,447 $50,556 $14,174 $252,907 Total $203,105 $13,371,675 $16,702,277 $20,356,591 $22,554,238 $25,102,445 $2,043,310 $100,333, NJCEP Commercial Loans Commercial customers implementing upgrades through NJCEP s Direct Install (DI), Pay for Performance (P4P), and Smart Start (SS) programs are eligible to access interest-free financing from SJG. The interest-free financing is available to reduce up-front cost barriers customers may face when installing energy efficient equipment. Consistent with current SJG program terms, customers may take advantage of both the NJCEP DI, P4P and SmartStart incentives and the repayment plan. Only customers who meet SJG s credit review criteria will be eligible to access financing. SJG reserves the right to limit participation in financing to customers who utilize natural gas within their facility. Market Segment/Efficiency Targeted All commercial customers participating in NJCEP s Direct Install, P4P and Smart Start Programs within SJG s service territory. This program covers a wide range of customer types and market segments, therefore the types of efficiency measures are numerous. 41

97 BSG-1 Page 45 of 51 Delivery Method SJG will utilize in-house staff for the credit screening for larger commercial and industrials customers, along with our financing agent. SJG staff will also assist in outreach and marketing to encourage customers to participate in these NJCEP programs and provide on-going support for customer inquiries throughout the process. Projected Participants and Energy Savings The projected participation and savings associated with this program are summarized in the table below. All values are annual incremental totals, and do not incorporate savings achieved in prior years. Participation estimates are based upon the expected number of loans provided for the DI, P4P and SS programs. Savings estimates are based on projected participation during each year of the forecast period. Table 19: NJCEP Commercial Loans Estimated Participation and Savings Program Participants Natural Gas Savings (therms) 262, , , , ,093 Electric Savings (kwh) 9,893,054 13,702,169 16,361,926 15,573,605 14,785,284 Electric Demand Savings (kw) 2,789 3,997 4,834 4,562 4,290 Relationship to Existing Programs The program is integrated with the NJCEP DI, P4P and SS programs. While external financing options may rely on traditional credit screening, for larger customers, SJG may also review eligibility to participate based on utility payment history and lack of recent bankruptcies for larger applications or other factors. This program approach is consistent with what SJG currently offers for our commercial customers under our current commercial financing programs. New Jersey Natural gas offers similar financing incentives for its customers. PSE&G offers its own version of a Direct Install program that is not integrated with the NJCEP program. Proposed Incentives For DI, financing will be available up to the value of project costs less NJCEP rebates/incentives, subject to prevailing caps. SJG proposes to increase the current repayment term of three (3) years to five (5) years. In the event NJCEP adjusts the incentive ratio or caps during the term of this approved program, the maximum available financing amount should be adjusted accordingly to continue to target the elimination of the up-front cost barrier. For the NJCEP SmartStart Program, the financed amount is expected to be equal to, or less than the total project costs, net NJCEP rebates/incentives. SJG proposes to increase the repayment term from the current term of five (5) years to a ten (10) year repayment term and proposes to allow customers to finance up to $130,000. The intention of this program is to offer affordable financing 42

98 BSG-1 Page 46 of 51 components for any single and/or multimeasure commercial programs that NJCEP and South Jersey Gas may offer. The P4P approach is to generate a minimum of 15% energy savings. In the case of the P4P program, there may be customers that could be approached in collaboration with South Jersey s C&I Engineered Solutions efforts. The South Jersey C&I Engineered Solutions program is also geared to generate maximum cost-effective energy savings from a comprehensive mechanical and building envelop approach. The difference is, South Jersey Gas is proposing the make the financial package more attractive to the customer, thus making the project economically feasible. SJG recognizes the potential for NJCEP program incentives or measures to change as NJCEP implements changes to align with the anticipated Strategic Plan. Marketing Approach SJG will work with NJCEP program administrators, as well as approved DI contractors, to promote this offering. Because SJG does not have access to the customers electric usage information, SJG will also promote this program through local business groups and organizations, and bill inserts directed to commercial customers, as well as other direct outreach efforts to this customer group. Dedicated commercial program information resides on our website and is also promoted by our marketing team. Additionally, SJG will work with NJCEP s administration to promote the program through various channels including: Local business organizations; Chambers of Commerce; Municipal outreach including partnering with Sustainable Jersey communities pursuing certification point for promoting NJCEP s Direct Install program; Town meetings; and Municipal green teams. For all commercial programs, informational seminars, direct mail and commercial outreach programs will also be utilized to reach commercial customers. Contractor Role SJG will allow any contractor authorized to participate in these NJCEP programs to offer the SJG financing option to their customers for qualified NJCEP projects Market Barriers The primary market barriers that impact this program include: Up-front costs: While the NJCEP DI program provides a significant incentive and turnkey solution for customers, the ability to cover the remaining up-front costs remains a significant hurdle for many customers. SJG addresses this barrier by offering financing options; 43

99 BSG-1 Page 47 of 51 Skepticism of contractor offer: Some customers are skeptical that the current NJCEP offer of a 70% incentive seems like a contractor ploy. SJG s participation in the process lends credibility; and Customer awareness: SJG continues to leverage our utility communication channels and provide direct outreach to customers to raise awareness of this program. Program Costs The table below illustrates the projected expenditures for the program. Table 20: NJCEP Commercial Loans Estimated Costs Program Cost Category Total Administration $9,112 $101,765 $106,825 $111,618 $114,479 $117,426 $31,740 $592,966 Marketing and Sales Contractor Training Rebates, Grants, and Other Incentives Rebate Processing, Inspections, and Quality Control $41,486 $345,357 $321,308 $310,526 $281,717 $250,918 $33,956 $1,585,270 $0 $0 $624 $642 $662 $682 $175 $2,785 $0 $1,187,857 $1,467,480 $1,672,379 $1,653,106 $1,633,833 $0 $7,614,655 $14,425 $145,375 $128,169 $131,653 $133,322 $134,328 $166,713 $853,986 Evaluation $8,125 $23,443 $23,971 $25,240 $25,510 $25,788 $8,143 $140,220 Total $73,148 $1,803,797 $2,048,377 $2,252,059 $2,208,797 $2,162,975 $240,729 $10,789, PROGRAM MANAGEMENT AND MARKET FACTORS 4.1. Anticipated Job Creation Consistent with previous filings, direct job creation related to the programs proposed in this EE Program Plan was forecasted with the Rutgers Analysis for the 2011 Draft New Jersey Energy Master Plan Update. 2 This report specifies 7.91 direct jobs created for every one-million dollars invested in energy efficiency in New Jersey. This investment will also have a multiplier effect on New Jersey s economy in that the direct jobs will spend part of their wages on other goods and 44

100 BSG-1 Page 48 of 51 services in New Jersey, creating additional economic value. Induced and indirect economic activity was forecasted using the National Renewable Energy Laboratory (NREL) Jobs and Economic Development Impact (JEDI) model. JEDI is an input-output economic impact model that has been accepted by the NJ BPU and uses state and industry specific economic multipliers that estimate the direct, indirect and induced economic impact of energy industry investments. While JEDI does not have a model specifically for energy efficiency investments, the solar PV model has similar economic characteristics (e.g. both have a large up-front investment for the initial installation followed by very low maintenance costs going forward). Further, both utilize a similar level of skilled trade workers. The model assumed that no New Jersey in-state manufacturing activity would result from the investments; to the extent manufacturing activity is induced, it would result in additional job and multiplier benefits to the State. The following table illustrates the direct and indirect and induced jobs to be created as a result of SJG s energy efficiency program: Table 21: Direct, Indirect, and Induced Job Creation Program Direct Job Creation Indirect and Inducted Job Creation Total Jobs Created Res Behavior Res Efficient Products Res Direct Install Res Retrofit Weatherization C&I Engineered Solutions NJCEP - Residential Programs NJCEP - Commercial Programs Education Emerging Technologies & Approaches Evaluation Total ,208 The indirect and induced job estimates above are based upon assumptions on equipment and supplies purchases, installation labor, and project administration expenditures. All purchases were assumed to be made in state while all materials would originate outside the state of New Jersey (i.e. 0% in-state manufacturing) Environmental Emissions Savings The impact of energy efficiency on power plant emissions was forecast using dispatch simulation results using the AURORAxmp modeling tool, an industry-leading software and data package that simulates the hourly commitment and dispatch of electric generators to serve load, recognizing utility-level peak demand, transmission constraints, operational characteristics of generators, delivered fuel prices, emissions prices, etc. To determine emissions savings, a base case simulation, which included current utility load forecasts, was compared against an energy 45

101 BSG-1 Page 49 of 51 efficiency case, in which total energy and peak demand were reduced to reflect SJG s energy efficiency program. Because AURORA dispatches generation at the individual unit level, the simulation results provide marginal emissions rates for CO2, SO2, and NOx. The difference between these two cases illustrates the total magnitude of emissions avoided as a result of the energy efficiency programs. Emissions rates associated with residential natural gas use were based upon the US Environmental Protection Agency s (EPA) emissions factors for residential natural gas use. The following table displays the emissions savings resulting from SJG s energy efficiency programs in U.S. tons. Table 22: Total Emissions Reduction by Program CO2 Emissions Subprogram Reduction (tons) SO2 Emissions Reduction (tons) NOx Emissions Reduction (tons) Res Behavior 67, Res Efficient Products 382, Res Home Performance w/ Direct Install 74, Res Retrofit Weatherization 70, C&I Engineered Solutions 169, NJCEP - Residential Programs 292, NJCEP - Commercial Programs 590, Education Emerging Technologies & Approaches Total 1,647,063 1,606 1, Energy Savings The incremental and cumulative energy savings impact from the proposed EEP IV program are summarized below in Tables 23 and 24, demonstrating significant benefits to participants, customers, and society as a whole. In its entirety, the programs proposed in this Program Plan result in approximately $320 million in participant bill savings and 1.6 million tons of avoided CO2 emissions (Table 22 above). 46

102 BSG-1 Page 50 of 51 Table 23 illustrates the projected annual natural gas savings in therms and percentage basis in incremental and cumulative terms over the lifetime of the measures included in the programs. Table 23: Incremental Annual Gas Savings (therm) and Percent of Gas Sales Year Incremental Cumulative Incremental Cumulative Natural Gas Natural Gas Natural Gas Natural Gas Savings Savings Savings (% Savings (%) (therms) (therm) load) ,657,595 1,718, % 0.12% ,161,978 3,388, % 0.23% ,531,433 5,319, % 0.36% ,668,967 7,485, % 0.50% ,709,096 9,741, % 0.66% ,156,707 10,898, % 0.73% ,783, % 0.73% ,508, % 0.71% ,198, % 0.69% ,883, % 0.67% ,588, % 0.65% ,610, % 0.58% ,603, % 0.51% ,574, % 0.44% ,588, % 0.38% ,063, % 0.34% ,025, % 0.34% ,905, % 0.33% ,631, % 0.31% ,155, % 0.28% ,466, % 0.23% ,714, % 0.18% ,042, % 0.14% ,446, % 0.10% , % 0.06% , % 0.03% , % 0.02% , % 0.02% , % 0.02% , % 0.02% 47

103 BSG-1 Page 51 of 51 Table 24 illustrates the projected annual electric savings in kwh in incremental and cumulative terms over the lifetime of the measures included in the programs. Table 24: Incremental Annual Electric Savings (kwh) and Electric Demand Savings (kw) Year Incremental Cumulative Incremental Cumulative Electric Electric Electric Savings Electric Savings Demand Savings Demand Savings (kwh) (kwh) (kw) (kw) ,479,405 13,664,269 4,542 3, ,481,885 32,477,173 6,239 6, ,842,013 53,642,498 7,604 10, ,843,376 77,263,825 7,818 15, ,713, ,245,612 7,987 19, ,663,701 21, ,112,576 20, ,071,452 20, ,175,161 19, ,184,602 19, ,390,308 19, ,677,015 19, ,864,894 19, ,682,175 19, ,578,071 19, ,469,466 19, ,963,509 18, ,878,390 17, ,037,355 15, ,000,214 12, ,752,886 9, ,782,953 5, ,224,340 3, ,133,326 2, ,138,692 1, ,684,314 1, , , , ,

104 Option 1: The customer can enter the energy efficiency journey with the Residential Direct Install Program. The customer would receive a home assessment for $49.00, during which energy saving measures, such as aerators and LED light bulbs, will be installed at no additional cost. The assessment will also provide customers an action plan of additional energy saving opportunities and education on other SJG programs available. Option 2: After participating in the Residential Direct Install Program, a customer may choose to purchase and install other efficient products, including a Smart Thermostat, through the Residential Efficient Products Program. Up-front rebates and/or discounts for these technologies will be provided through this Program. If a customer is already participating in the Residential Direct Install Program, these items will be installed at no additional cost. Option 3: After participating in the Residential Direct Install Program and/or the Residential Efficient Products Program, a customer may choose to obtain whole house energy efficiency, comfort and savings through the NJCEP Residential Loans/Rebates Program. NOTE: Customers can start or end with any of the programs. This represents one example of potential options for a customer starting with the Residential Direct Install Program. BSG-2 South Jersey Gas Company Customer Journey Residential Direct Install Residential Customer Residential Direct Install Residential Efficient Products Residential Direct Install Residential Efficient Products NJCEP Residential Loans/Rebates

105 Administration $ 206,041 $ 736,988 $ 509,343 $ 499,342 $ 1,010,624 $ 2,528,044 $ 592,966 $ 149,397 $ 628,849 $ - $ 6,861,593 Marketing and Sales $ 246,398 $ 1,783,576 $ 778,242 $ 467,200 $ 736,685 $ 6,430,734 $ 1,585,270 $ 638,203 $ 433,102 $ - $ 13,099,410 Contractor Training $ - $ 632,605 $ 3,991 $ 2,605 $ - $ 39,080 $ 2,785 $ - $ 1,040 $ - $ 682,106 Incentives (Including Rebates, Loans, & Other Incentives) $ 5,950,000 $ 16,552,330 $ 5,858,078 $ 11,354,157 $ 14,397,878 $ 84,524,200 $ 7,614,655 $ 3,400,000 $ 6,400,000 $ - $ 156,051,298 Rebate Processing, Inspections, and Quality Control $ 110,070 $ 3,397,440 $ 354,231 $ 314,836 $ 455,807 $ 6,558,677 $ 853,986 $ 57,986 $ 178,618 $ - $ 12,281,651 Evaluation $ 37,519 $ 91,245 $ 80,677 $ 73,897 $ 143,043 $ 252,907 $ 140,220 $ 24,027 $ 69,142 $ 5,570,550 $ 6,483,227 Total Budget $ 6,550,028 $ 23,194,183 $ 7,584,562 $ 12,712,039 $ 16,744,037 $ 100,333,642 $ 10,789,882 $ 4,269,612 $ 7,710,750 $ 5,570,550 $ 195,459,285 BSG-3 South Jersey Gas Company Energy Efficiency Program Extension (EET IV) Program Expenditures Residential Behavior Residential Efficient Products Residential Direct Install Residential Retrofit Weatherization C&I Engineered Solutions NJCEP - Residential Programs NJCEP - Commercial Programs Education Emerging Technologies & Approaches EM&V Costs Total

106 BSG-4 Page 1 of 2 South Jersey Gas Company Energy Efficiency Program Comparison South Jersey Gas Program NJCEP Programs New Jersey Utility Programs Out of State Utility Programs NJCEP Residential Loans/Rebates NJCEP offers the following residential programs: Home Performance Program Warm Advantage Cold Advantage South Jersey Gas aligns to these programs through financing and supplemental rebate offers. New Jersey Natural Gas (NJNG) offers similar Home Performance and HVAC incentive programs to complement the NJCEP programs. Elizabethtown Gas offers HVAC equipment rebates. Out-of-state programs with similarities to the proposed program are offered by the following administrators, among others: National Grid (Massachusetts & Rhode Island), EnergizeCT (Connecticut), and Efficiency Vermont (Vermont) NJCEP Commercial Loans/Rebates NJCEP offers the following commercial programs: Direct Install Smart Start Pay for Performance Commercial customers implementing upgrades through NJCEP s Direct Install, Smart Start and Pay for Performance programs are eligible to access interest-free financing from SJG. NJNG offers similar Direct Install and Smart Start programs. Public Service Electric and Gas (PSEG) offers their own Direct Install program. Out-of-state programs with similarities to the proposed program are offered by the following administrators, among others: Consumers Energy (Michigan), Consolidated Edison (New York) and National Grid (Massachusetts & Rhode Island) Residential Behavior NJCEP does not offer a similar program. NJNG and Elizabethtown Gas offer similar Residential Behavior programs. PSEG was approved to offer a Residential Behavior program. Similar program have been offered throughout the United States, Canada, England, France, New Zealand and Japan. Within the US, utitlities such as : American Electric Power (Ohio), Commonwealth Edison, (Illnois), Consolidated Edison (New York), Duken Energy (North Carolina), National Grid (Massachusetts & Rhode Island), Pacific Gas and Electric (California), San Diego Gas and Electric (California), Xcel Energy (Minnesota) Residential Efficient Products NJCEP offers an Energy Efficiency Products program for clothes washers, dryers and refrigerators. They do not provide incentives for smart thermostats, water saving items, or low cost weatherization products. PSEG offers Smart Thermostats with $150 rebate. Throughout the country, utilities offer Smart Thermostat rebates and/or efficient products through an online marketplace such as: Commonwealth Edison (Illinois), Georgia Power (Georgia), Xcel Energy (Minnesota), Central Hudson (New York), National Grid (New York), Avangrid (New York), Consumers Energy (Michigan), SMUD (California), AEP Energy (Ohio), Orange & Rockland (New York), and Vectren Energy (Indiana)

107 BSG-4 Page 2 of 2 South Jersey Gas Company Energy Efficiency Program Comparison South Jersey Gas Program NJCEP Programs New Jersey Utility Programs Out of State Utility Programs Residential Home Energy Assessment with Direct Install NJCEP has a Home Performance direct install pilot in conjunction with the Home Performance Program. For a limited time, contractors may install up to nine energy and/or water saving items at no cost to customers. The direct install measures will be completed while the customer is having a contractor install energy efficient upgrades to their home through the Home Performance Program. This is not a standalone offer. The eligible items included are LED light bulbs, low-flow faucet aerators and an EPA WaterSense showerhead. This pilot also provides the customer with the option of having a contractor install air sealing and/or insulation in their home and may be eligible for a $500 rebate for air sealing, and a $500 rebate for insulation. NJNG offers a home energy assessment for $250 but does not include direct install measures. Elizabethtown Gas offers a home energy assessment at no cost to the customer and offers the installation of other measures like faucet aerators, low-flow showerheads, water heater pipe wrap insulation, and programmable thermostats. Out-of-state programs with similarities to the proposed program are offered by the following administrators, among others: Nicor (New York), Consolidated Edison (New York) and National Grid (Massachusetts & Rhode Island) Residential Retrofit Weatherization The NJCEP offers a program directed to Low Income homeowners, who meet a maximum of 225% of the current Federal Poverty household income levels. This program is offered to customers at no cost. Elizabethtown Gas has been approved, on a pilot basis, to offer energy conservation tips and free home weatherization for income qualified customers,who are not economically able to fall within the guidelines of the NJCEP Low Income Comfort Partners model. Out-of-state programs with similarities to the proposed program are offered by the following administrators, among others: Efficiency Vermont (Vermont), Eversource(Connecticut) and EmPower Maryland (Maryland) C&I Engineered Solutions NJCEP offers a Pay for Performance program. PSEG has a similar program that serves hospitals and mulifamily markets. To our knowledge there are no out-of-state programs that combine these program elements into a single engineered solutions offering. Out-of-state programs with similiarities to the proposed program include, among others: Centerpoint Energy, Pacific Gas and Electric (California) and PECO (Pennsylvania) Emerging Technologies and Approaches NJCEP does not offer a similar program. To our knowledge, no other New Jersey utility is currently offering a R&D program. We anticipate other New Jersey utilities will partner in the proposed program. To our knowledge there are no out-of-state programs currently offering this program. Education NJCEP does not offer a similar program. NJNG offers a similar program with Alliance to Save Energy's PowerSave program. Alliance to Save Energy's Powersave program has partnered with over 1000 schools and has been funded by over 19 utilities including Southern California Edison, Pacific Gas &Electric. This program is also offered in Maryland and Pennsylvania.

108 EXHIBIT D BEFORE THE NEW JERSEY BOARD OF PUBLIC UTILITIES SOUTH JERSEY GAS COMPANY Direct Testimony of Stefany M. Graham, Manager, Rates and Regulatory Initiatives On Behalf of South Jersey Gas Company

109 EXHIBIT D SCHEDULE INDEX Schedule SMG 1 Schedule SMG 2 Schedule SMG 3 Schedule SMG 4 Annual Revenue Requirements Weighted Average Cost of Capital Revenue Factor Monthly Recovery and Interest Calculation Schedule SMG 5 Comparative Balance Sheet Schedule SMG 6 Comparative Income Statement Schedule SMG 7 Balance Sheet at December 31, 2017 Schedule SMG 8 Statement of Revenue at December 31, 2017 Schedule SMG 9 Utility Payments or Accruals to Affiliates Schedule SMG 10 Accounts and Account Numbers Schedule SMG 11 Pro Forma Income Statement Schedule SMG 12 Annual Rate and Bill Impact Summary Schedule SMG 13 Proposed Tariff Sheet 1

110 EXHIBIT D I. INTRODUCTION Q. Please state your name, affiliation and business address. A. My name is Stefany M. Graham and I am Manager, Rates and Regulatory Initiatives for South Jersey Gas Company ( South Jersey or SJG or the Company ). My business address is South Jersey Gas, One South Jersey Plaza, Route 54, Folsom, NJ Q. Please summarize your professional and educational background. A. I graduated in 2011 with a Bachelor of Science Degree in Accounting from Pennsylvania State University and I obtained a Masters in Business Administration Degree with a concentration in Finance from Drexel University in In October 2014, I joined the Internal Audit Department at South Jersey Industries, Inc. ( SJI ), and subsequently accepted the role of Senior Rate Analyst in the Rates and Revenue Requirement Department in May Most recently, in December 2017, I was promoted to my current position, Manager, Rates and 16 Regulatory Initiatives for South Jersey. In my current role, I manage the Company s Rate Department activities relative to South Jersey s regulatory initiatives and strategic planning. I also prepare and support rate and revenue related filings before the Board of Public Utilities ( BPU or the Board ). Prior to my employment at South Jersey, I worked for the Big Four public accounting firm of Deloitte, LLP as an auditor for a diverse client base, as well as the Internal Audit Department at Virtua Health. I am a member of the American Gas 2

111 EXHIBIT D 1 2 Association (AGA) and the New Jersey Utilities Association (NJUA), where I serve on the Finance and Regulations Committee. 3 4 II. PURPOSE OF TESTIMONY Q. What is the purpose of your testimony in this proceeding? A. The purpose of my testimony is to address the revenue requirements and cost recovery mechanism associated with the Company s proposed continuation of its Energy Efficiency Programs ( EEPs ). My testimony also provides information responsive to certain Minimum Filing Requirements ( MFRs ) required pursuant to the Board s October 20, 2017 Order in Docket No. QO (the October 2017 Order ), which established the procedures by which electric and natural gas utilities may seek approval of energy efficiency and conservation programs on a regulated basis. The proposed EEPs and the related investments and O&M budgets are described in detail in the Direct Testimony of Bruce S. Grossman, Program Manager, Residential Energy Efficiency III. REVENUE REQUIREMENTS Q. Please provide a brief description of the revenue requirements for the proposed EEPs. A. The revenue requirements for the proposed EEPs are detailed on the attached Schedule SMG-1. The revenue requirement components vary with the type of incentive provided to customers. The proposed EEPs can be divided into two general types of incentives: Loan Program Investments and Direct Program 3

112 EXHIBIT D Investments. The Loan Program Investment category is comprised of the loan incentives that will be provided by the Company through the NJCEP Residential Loans/Rebates Program, the NJCEP Commercial Loans Program, and the C&I Engineered Solutions Program. The Direct Program Investments category is comprised of grants and energy audits, as well as other capitalizable expenditures required to implement the proposed programs. The total program revenue requirements are calculated by adding the revenue requirements for the Direct Program Investments and the Loan Program Investments. The revenue requirement components also include accumulated amortization of the direct investments, accumulated deferred income tax ( ADIT ), pre-tax weighted average cost of capital ( WACC ), incremental pretax operating and maintenance ( O&M ) expense, and a revenue factor, as discussed in further detail below. The determination of revenue requirements is consistent with previous BPU approvals of SJG s EEPs Q. Please provide the revenue requirement calculation for the Direct Program Investments. A. The Direct Program Investment revenue requirement calculation is as follows: Revenue Requirement = ((Direct Program Net Investment * Pre-Tax WACC) + Incremental Pre-Tax O&M Expense + Pre- Tax Amortization) * Revenue Factor 22 4

113 EXHIBIT D Q. Likewise, please provide the revenue requirement calculation for the Loan Program Investments. A. The Loan Program Investment revenue requirement calculation is as follows: Revenue Requirement = ((Loan Program Net Investment * Pre- Tax WACC) + Incremental Pre-Tax O&M Expense) * Revenue Factor Q. Please explain how the net investment is calculated for the Direct Program Investments and Loans. A. Direct Program net investments are comprised of the cumulative program investments, less the accumulated amortization, less the accumulated deferred income tax. Loan Program net investments are calculated as the cumulative program investments, less loan repayments Q. Please explain which investments are amortized and the amortization period. A. Only the Direct Program Investments will be amortized. The Company proposes an amortization period of sixteen (16) years to better align with the useful life of the measures being installed, calculated based on the weighted average measure life for each of the programs. The proposed amortization timeframe would also have the benefit of reducing the annual rate impact of the program to ratepayers Q. How is the ADIT calculated and applied? 5

114 EXHIBIT D A. The ADIT is only applicable to the Direct Program Investments revenue requirement. The ADIT is calculated as the accumulated Direct Program Investments, less accumulated amortization, multiplied by a 28.11% tax rate. The 28.11% tax rate is a combination of the Federal income tax rate of 21% and the State corporate business tax of 9% Q. What is the basis for the rate of return used to calculate the revenue requirements? A. The Company is using a rate of return ( ROR ) of 6.80%, or 8.77% on a pre-tax basis. This is the WACC utilized to set rates in the Company s most recent base rate case in Docket No. GR , updated to reflect the recent Federal corporate tax rate change to 21%, effective January 1, Any change in the WACC authorized by the Board in a subsequent base rate case will be reflected in the subsequent monthly revenue requirement calculations. Any change in the revenue requirement resulting from the change in the WACC will not be included in the monthly interest calculation for over and under recoveries until the date of the next scheduled annual true-up but in any event, no later than October 1 of the subsequent year. In addition, any changes to current tax rates would be reflected in an adjustment to the Pre-Tax WACC. The WACC calculation is attached hereto as Schedule SMG Q. What assumptions and types of expenses are included in the incremental O&M used to calculate the revenue requirement? 6

115 EXHIBIT D A. Consistent with the prior approval of the Company s EET III Extension Program, South Jersey is seeking to recover O&M expenses, which include administration, marketing and sales, training, inspections and quality control, and evaluation costs incurred to run the EEPs Q. Please explain the basis for the revenue factor used to calculate the revenue requirements. A. The revenue factor reflects tax adjustments for Sales and Use Tax ( SUT ), Public Utility Assessment Tax ( PUA ), and bad debt allowance. The Company is using a revenue factor of , which is the revenue factor utilized to set rates in the Company s most recent base rate case in Docket No. GR and further removing the Federal and State corporate business tax. The calculation of this revenue factor is attached hereto as Schedule SMG IV. COST RECOVERY MECHANISM Q. Please describe the cost recovery mechanism proposed by the Company for the recovery of costs associated with the EEPs. A. The proposed cost recovery mechanism is consistent with the cost recovery mechanism approved by the Board for the Company s current EEPs. The Company recovers its costs associated with the EEPs through the Energy Efficiency Tracker ( EET ), which is set forth in Rider N to the Company s Tariff. Total EEP revenue requirements for an annual period are calculated and recovered though a volumetric charge applicable to all firm throughput. Rider 7

116 EXHIBIT D N also includes provisions for the treatment of any over or under recoveries. Recovery of the revenue requirements associated with the Company s proposed EEP IV program will be accomplished by deriving a rate associated with the EEP revenue requirements and adding it to the Company s currently approved EET rate. The forecasted recovery of the EEP IV year one revenue requirement is attached hereto as Schedule SMG Q. Please explain how the rate associated with the Company s proposed EEPs is derived. A. The total revenue requirement equals the sum of the Direct Program Investment revenue requirement and the Loan Program Investment revenue requirement. The total revenue requirement is divided by the applicable firm throughput to derive the rate per therm, excluding taxes Q. What is the basis for the therms used to calculate the rate? A. The initial recovery rate for the proposed EEPs is based on forecasted revenue requirements for the period October 1, 2018 to September 30, The initial period was proposed to align future cost recovery periods with the EET year ending September 30 th, as set forth in Rider N of the Company s Tariff, and to achieve conformity with the Company s existing EET recovery rate. Annual true-up filings covering the recovery period of October 1 st to September 30 th will be submitted commencing in June The forecasted volumes for the initial recovery period are 482,486,715 therms. These volumes reflect firm consumption 8

117 EXHIBIT D for all rate classes that are charged the EET. In forecasting its customer consumption, the Company utilizes ten years of historical usage and 20 years of normalized weather data Q. How will the Company account for any over/under recoveries? A. Consistent with the cost recovery mechanism approved by the Board for the Company s current EEPs, the Company would defer any over/under recovery of the actual revenue requirements compared to revenues. In calculating the monthly interest on net over and under recoveries, the interest rate shall be based on the Company s monthly average Short-Term Debt rate. The calculation of monthly interest expense is attached hereto as Schedule SMG Q. Please provide the initial EET rate associated with the Company s proposed EEPs, as well as the associated customer bill impacts. A. The EET rate and annual customer bill impact associated with the rate for each year of the EEP IV program are included in Schedule SMG-1. The proposed Year 1 EET rate will be $ per therm, including taxes, and $ per therm, excluding taxes. This represents an increase of $ per therm to the current EET rate of $ per therm, for a total combined EET rate of $ per therm, to be effective upon issuance of a Board Order. The bill impact for a residential heating customer using 100 therms during a winter month will be an increase of $1.15, or 0.8%. The cumulative annual bill impacts for all 9

118 EXHIBIT D 1 2 approved and proposed programs, for all rate classes, are provided in Schedule SMG V. ADDITIONAL MINIMUM FILING REQUIREMENTS Q. Please provide a comparative balance sheet for the most recent three-year period. A. Please see the attached Schedule SMG-5, which reflects the Company s balance sheets as of December 31 st for 2017, 2016, and 2015, as stated in the Company s annual SEC 10K filings Q. Please provide a comparative income statement for the most recent threeyear period. A. Please see the attached Schedule SMG-6, which reflects the Company s income statement for the year ending December 31 st for 2017, 2016, and Q. Please provide a balance sheet with the most recent date available. A. Please see the attached Schedule SMG-7, which reflects the Company s balance sheet as of December 31, Q. Please provide a statement of the amount of revenue derived in the calendar year last preceding the institution of this proceeding from the intrastate sales of natural gas. 10

119 EXHIBIT D 1 2 A. Please see the attached Schedule SMG-8 which lists the Company s intrastate revenue for the year ending December 31, 2017 by customer class Q. Please provide a schedule of payments and accruals made to affiliated companies. A. Please see the attached Schedule SMG-9 listing payments and accruals made to affiliated companies for the year ending December 31 st for 2017, 2016, and Q. Please provide the accounts and account numbers that will be utilized in booking revenue, costs, expenses and assets pertaining to each proposed program and indicate which accounts will be debited or credited monthly. A. Please see the attached Schedule SMG-10 which provides the account numbers for all accounting entries related to each EEP as well as which accounts will be debited or credited monthly Q. Please provide pro forma income statements and balance sheets for the program for each of the first three years of operations and actual or estimated balance sheets at the beginning and end of each year of said threeyear period. A. Please see the attached Schedule SMG-11. The pro forma income statement and balance sheet reflect the first three years of the program

120 EXHIBIT D Q. Please provide an annual cumulative rate impact summary for all approved and proposed programs as well as a cumulative bill impact summary by year for all approved and proposed programs. A. Please see the attached Schedule SMG-12 for the annual rate impact and bill impact by year for all approved and proposed EEPs Q. Please provide proposed tariff sheets associated with the proposed EEPs. A. Please see the attached Schedule SMG-13 for the proposed tariff sheets and Rider N, in redlined form Q. Does this conclude your testimony? A. Yes, it does. 12

121 South Jersey Gas Company Energy Efficiency Tracker Extension (EET IV) Annual Revenue Requirements SMG-1 Page 1 of 3 Year 1 Year 2 Year 3 Year 4 DIRECT PROGRAM INVESTMENTS Annual Investment $ 6,315,276 $ 11,549,539 $ 14,177,168 $ 16,587,118 Cumulative Investment $ 6,315,276 $ 17,864,816 $ 32,041,984 $ 48,629,102 Less Accumulated Amortization $ (148,075) $ (880,399) $ (2,421,815) $ (4,923,405) Less Accumulated Deferred Tax $ (1,733,600) $ (4,774,320) $ (8,326,230) $ (12,285,671) Net Investment $ 4,433,601 $ 12,210,097 $ 21,293,940 $ 31,420,025 Rate of Return (Pre Tax) 8.77% 8.77% 8.77% 8.77% Required Net Operating Income (Based on Avg. Annual Investment) $ 179,739 $ 768,986 $ 1,525,875 $ 2,377,770 Incremental O&M Pre Tax $ 2,392,045 $ 2,985,125 $ 2,981,160 $ 2,952,010 Pre Tax Amortization $ 148,075 $ 732,323 $ 1,541,416 $ 2,501,590 Operating Income $ 2,719,860 $ 4,486,435 $ 6,048,451 $ 7,831,370 Revenue Factor Revenue Requirement $ 2,965,569 $ 4,891,734 $ 6,594,861 $ 8,538,848 Revenue Requirement Excluding SUT $ 2,781,307 $ 4,587,793 $ 6,185,099 $ 8,008,298 LOAN PROGRAM INVESTMENTS Annual Investment $ 7,622,076 $ 13,005,055 $ 16,774,624 $ 19,839,890 Less Loan Repayments $ (442,370) $ (2,006,561) $ (4,065,667) $ (6,605,291) Net Investment $ 7,179,706 $ 10,998,494 $ 12,708,957 $ 13,234,600 Cumulative Investment $ 7,179,706 $ 18,178,199 $ 30,887,156 $ 44,121,756 Rate of Return (Pre Tax) 8.77% 8.77% 8.77% 8.77% Required Net Operating Income (Based on Avg. Annual Investment) $ 271,647 $ 2,214,174 $ 2,214,174 $ 3,375,940 Incremental O&M Pre Tax $ 2,066,675 $ 2,417,659 $ 2,382,448 $ 2,278,383 Operating Income $ 2,338,323 $ 3,579,788 $ 4,596,622 $ 5,654,324 Revenue Factor Revenue Requirement $ 2,549,564 $ 3,903,182 $ 5,011,876 $ 6,165,129 Revenue Requirement Excluding SUT $ 2,391,150 $ 3,660,663 $ 4,700,469 $ 5,782,067 RATE CALCULATION Revenue Requirement For Direct Investments Excluding Taxes $ 2,781,307 $ 4,587,793 $ 6,185,099 $ 8,008,298 Revenue Requirement For Loans Programs Excluding Taxes $ 2,391,150 $ 3,660,663 $ 4,700,469 $ 5,782,067 Prior Year (Over)/Under Recovered Deferred Balance Including Carrying Costs $ - $ (25,961) $ (31,370) $ (40,234) Total Revenue Requirements $ 5,172,458 $ 8,222,495 $ 10,854,198 $ 13,750,132 Therms 482,486, ,775, ,775, ,775,535 Rate Per Therm, Excluding SUT and PUA $ $ $ $ Rate Per Therm, Including PUA $ $ $ $ Rate Per Therm, Including SUT and PUA $ $ $ $ Annual Bill Impact Residential Non Heat (210 Therms) $ 2.40 $ 1.42 $ 1.22 $ 1.35 Residential Heat (727 Therms) $ 8.33 $ 4.90 $ 4.24 $ 4.65 General Service (3,595 Therms) $ $ $ $ General Service - Large Volume (178,885 Therms) $ 2, $ 1, $ 1, $ 1,146.84

122 South Jersey Gas Company Energy Efficiency Tracker Extension (EET IV) Annual Revenue Requirements SMG-1 Page 2 of 3 Year 5 Year 6 Year 7 Year 8 DIRECT PROGRAM INVESTMENTS Annual Investment Cumulative Investment Less Accumulated Amortization Less Accumulated Deferred Tax Net Investment Rate of Return (Pre Tax) Required Net Operating Income (Based on Avg. Annual Investment) Incremental O&M Pre Tax Pre Tax Amortization Operating Income Revenue Factor Revenue Requirement Revenue Requirement Excluding SUT $ 18,754,377 $ 8,144,774 $ 984,262 $ 325,071 $ 67,383,479 $ 75,528,253 $ 76,512,516 $ 76,837,587 $ (8,528,331) $ (13,072,688) $ (17,827,877) $ (22,619,460) $ (16,544,182) $ (17,556,259) $ (16,496,252) $ (15,240,715) $ 42,310,966 $ 44,899,306 $ 42,188,387 $ 38,977, % 8.77% 8.77% 8.77% $ 3,307,293 $ 3,935,740 $ 3,815,041 $ 3,547,010 $ 2,912,770 $ 1,732,974 $ 428,048 $ 38,201 $ 3,604,926 $ 4,544,357 $ 4,755,189 $ 4,791,583 $ 9,824,988 $ 10,213,071 $ 8,998,277 $ 8,376, $ 10,712,567 $ 11,135,709 $ 9,811,172 $ 9,133,544 $ 10,046,956 $ 10,443,807 $ 9,201,568 $ 8,566,044 LOAN PROGRAM INVESTMENTS Annual Investment Less Loan Repayments Net Investment Cumulative Investment Rate of Return (Pre Tax) Required Net Operating Income (Based on Avg. Annual Investment) Incremental O&M Pre Tax Operating Income Revenue Factor Revenue Requirement Revenue Requirement Excluding SUT RATE CALCULATION Revenue Requirement For Direct Investments Excluding Taxes Revenue Requirement For Loans Programs Excluding Taxes Prior Year (Over)/Under Recovered Deferred Balance Including Carrying Costs Total Revenue Requirements Therms Rate Per Therm, Excluding SUT and PUA Rate Per Therm, Including PUA Rate Per Therm, Including SUT and PUA Annual Bill Impact Residential Non Heat (210 Therms) Residential Heat (727 Therms) General Service (3,595 Therms) General Service - Large Volume (178,885 Therms) $ 22,812,431 $ 8,690,134 $ 389,030 $ - $ (9,558,744) $ (11,950,056) $ (12,374,370) $ (12,139,705) $ 13,253,687 $ (3,259,922) $ (11,985,340) $ (12,139,705) $ 57,375,443 $ 54,115,521 $ 42,130,181 $ 29,990, % 8.77% 8.77% 8.77% $ 4,542,255 $ 5,085,728 $ 4,181,565 $ 3,112,495 $ 2,146,081 $ 805,261 $ 123,601 $ 25,466 $ 6,688,336 $ 5,890,989 $ 4,305,167 $ 3,137, $ 7,292,553 $ 6,423,175 $ 4,694,091 $ 3,421,440 $ 6,839,440 $ 6,024,079 $ 4,402,430 $ 3,208,854 $ 10,046,956 $ 10,443,807 $ 9,201,568 $ 8,566,044 $ 6,839,440 $ 6,024,079 $ 4,402,430 $ 3,208,854 $ (49,770) $ (60,663) $ (48,561) $ (40,237) $ 16,836,626 $ 16,407,223 $ 13,555,437 $ 11,734, ,775, ,775, ,775, ,775,535 $ $ $ $ $ $ $ $ $ $ $ $ $ 1.43 $ (0.20) $ (1.32) $ (0.85) $ 4.97 $ (0.69) $ (4.59) $ (2.93) $ $ (3.43) $ (22.69) $ (14.49) $ 1, $ (170.30) $ (1,129.48) $ (721.09)

123 South Jersey Gas Company Energy Efficiency Tracker Extension (EET IV) Annual Revenue Requirements SMG-1 Page 3 of 3 Year 9 Year 10 Year 11 Year 12 Year 13 DIRECT PROGRAM INVESTMENTS Annual Investment Cumulative Investment Less Accumulated Amortization Less Accumulated Deferred Tax Net Investment Rate of Return (Pre Tax) Required Net Operating Income (Based on Avg. Annual Investment) Incremental O&M Pre Tax Pre Tax Amortization Operating Income Revenue Factor Revenue Requirement Revenue Requirement Excluding SUT $ 293,636 $ 211,581 $ 150,120 $ 99,908 $ 21,806 $ 77,131,222 $ 77,342,803 $ 77,492,923 $ 77,592,831 $ 77,614,637 $ (27,430,386) $ (32,257,734) $ (37,096,245) $ (41,942,712) $ (46,793,399) $ (13,970,905) $ (12,673,413) $ (11,355,506) $ (10,021,249) $ (8,663,850) $ 35,729,931 $ 32,411,656 $ 29,041,172 $ 25,628,871 $ 22,157, % 8.77% 8.77% 8.77% 8.77% $ 3,263,647 $ 2,975,934 $ 2,682,179 $ 2,384,657 $ 2,082,838 $ 6,200 $ 3,472 $ 2,232 $ 1,984 $ 496 $ 4,810,927 $ 4,827,348 $ 4,838,510 $ 4,846,467 $ 4,850,688 $ 8,080,773 $ 7,806,754 $ 7,522,921 $ 7,233,108 $ 6,934, $ 8,810,781 $ 8,512,008 $ 8,202,533 $ 7,886,540 $ 7,560,434 $ 8,263,335 $ 7,983,126 $ 7,692,880 $ 7,396,520 $ 7,090,677 LOAN PROGRAM INVESTMENTS Annual Investment Less Loan Repayments Net Investment Cumulative Investment Rate of Return (Pre Tax) Required Net Operating Income (Based on Avg. Annual Investment) Incremental O&M Pre Tax Operating Income Revenue Factor Revenue Requirement Revenue Requirement Excluding SUT RATE CALCULATION Revenue Requirement For Direct Investments Excluding Taxes Revenue Requirement For Loans Programs Excluding Taxes Prior Year (Over)/Under Recovered Deferred Balance Including Carrying Costs Total Revenue Requirements Therms Rate Per Therm, Excluding SUT and PUA Rate Per Therm, Including PUA Rate Per Therm, Including SUT and PUA Annual Bill Impact Residential Non Heat (210 Therms) Residential Heat (727 Therms) General Service (3,595 Therms) General Service - Large Volume (178,885 Therms) $ - $ - $ - $ - $ - $ (11,043,347) $ (9,023,308) $ (6,532,363) $ (3,633,573) $ (1,231,590) $ (11,043,347) $ (9,023,308) $ (6,532,363) $ (3,633,573) $ (1,231,590) $ 18,947,129 $ 9,923,820 $ 3,391,457 $ (242,115) $ (1,473,705) 8.77% 8.77% 8.77% 8.77% 8.77% $ 2,092,472 $ 1,215,945 $ 540,004 $ 102,599 $ (91,786) $ 12,550 $ 7,028 $ 4,518 $ 4,016 $ 1,004 $ 2,105,022 $ 1,222,973 $ 544,522 $ 106,615 $ (90,782) $ 2,295,188 $ 1,333,456 $ 593,714 $ 116,246 $ (98,983) $ 2,152,579 $ 1,250,603 $ 556,824 $ 109,023 $ (92,833) $ 8,263,335 $ 7,983,126 $ 7,692,880 $ 7,396,520 $ 7,090,677 $ 2,152,579 $ 1,250,603 $ 556,824 $ 109,023 $ (92,833) $ (36,873) $ (32,741) $ (29,243) $ (26,372) $ (23,967) $ 10,379,042 $ 9,200,988 $ 8,220,461 $ 7,479,171 $ 6,973, ,775, ,775, ,775, ,775, ,775,535 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (0.63) $ (0.54) $ (0.46) $ (0.35) $ (0.23) $ (2.18) $ (1.89) $ (1.58) $ (1.20) $ (0.81) $ (10.79) $ (9.38) $ (7.80) $ (5.90) $ (4.02) $ (536.83) $ (466.54) $ (388.36) $ (293.73) $ (200.17)

124 SMG-2 SOUTH JERSEY GAS COMPANY ENERGY EFFICIENCY TRACKER EXTENSION (EET IV) WEIGHTED AVERAGE COST OF CAPITAL DOCKET NO. GR Revenue Conversion Pre-Tax Type of Capital Ratios Cost Rate Weighted Cost Rate Factor* Weighted Cost Rate Long-Term Debt 47.50% 3.70% 1.76% 1.76% Common Equity 52.50% 9.60% 5.04% % 7.01% % 6.80% 8.77% *Tax Reflects FIT Rate of 21%, effective January 1, 2018

125 SMG-3 SOUTH JERSEY GAS COMPANY ENERGY EFFICIENCY TRACKER EXTENSION (EET IV) DERIVATION OF REVENUE FACTOR Line No. 1 2 Components: 3 4 Sales and Use Tax (SUT) 6.625% 5 6 Public Utility Assessment Tax (PUA) % 7 8 Bad Debt Provision (Bad Debt) % 9 10 Operating Revenue Revenue Factor Calculation: * * =

126 Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Total SMG-4 South Jersey Gas Company Energy Efficiency Tracker Extension (EET IV) Monthly Recovery and Interest Calculation 1 $ $ $ $ $ $ $ $ $ $ 317,400 $ (12,827) $ $ (330,227) $ - $ (12,827) $ (12,827) $ $ (123,311) $ $ (257) $ (13,134) $ $ (13,134) Period Volumes 26,537,197 33,970,999 49,643,226 57,610,774 59,914,455 61,038,525 48,571,062 41,259,930 28,815,014 25,678,330 25,064,601 24,382, ,486, Recovery Rate $ $ $ $ $ $ $ $ $ $ Recoveries $ 285,195 $ 365,086 $ 533,516 $ 619,143 $ 643,901 $ 655,981 $ 521,993 $ 443,420 $ 309,675 $ 275, , ,040 5,185, Revenue Requirements Excluding SUT $ 136,324 $ 136,484 $ 136,644 $ 478,813 $ 494,212 $ 500,529 $ 509,561 $ 524,685 $ 543,464 $ 560, , ,440 5,172, Less Recoveries $ 285,195 $ 365,086 $ 533,516 $ 619,143 $ 643,901 $ 655,981 $ 521,993 $ 443,420 $ 309,675 $ 275, , ,040 5,185, Monthly (Over)/Under Recovered Balance $ (148,871) $ (228,602) $ (396,872) $ (140,330) $ (149,689) $ (155,452) $ (12,432) $ 81,264 $ 233,789 $ 284, , Beginning (Over)/Under Recovered Balance $ - $ (148,871) $ (377,474) $ (774,346) $ (914,676) $ (1,064,365) $ (1,219,817) $ (1,232,249) $ (1,150,984) $ (917,195) (632,721) Ending (Over)/Under Recovered Balance $ (148,871) $ (377,474) $ (774,346) $ (914,676) $ (1,064,365) $ (1,219,817) $ (1,232,249) $ (1,150,984) $ (917,195) $ (632,721) (330,227) $ Average (Over)/Under Recovered Balance (Net of Taxes) 71.89% $ (53,512) $ (189,195) $ (414,022) $ (607,119) $ (711,366) $ (821,049) $ (881,395) $ (856,653) $ (743,407) $ (557,117) (346,132) Interest (To Customers) / To Company $ (111) $ (394) $ (863) $ (1,265) $ (1,482) $ (1,711) $ (1,836) $ (1,785) $ (1,549) $ (1,161) (721) Cumulative Interest $ (111) $ (506) $ (1,368) $ (2,633) $ (4,115) $ (5,826) $ (7,662) $ (9,446) $ (10,995) $ (12,156) (12,877) Annual Interest Rate (SJG Avg Borrowing) % % % % % % % % % % % %

127 SMG-5 Page 1 of 2 SOUTH JERSEY GAS COMPANY BALANCE SHEETS - ASSETS AT END OF PERIODS INDICATED (In Thousands) December 31, Line No. Assets 1 Property, Plant and Equipment: 2 Utility Plant, at original cost $ 2,652,244 $ 2,424,134 $ 2,211, Accumulated Depreciation (498,161) (471,222) (440,473) 5 Property, Plant and Equipment - Net 2,154,083 1,952,912 1,770, Investments: 8 Available-for-Sale Securities - 9,270 8,788 9 Restricted Investments 2, , Total Investments 2,912 9,302 15, Current Assets: 14 Cash and Cash Equivalents 1,707 1, Notes Receivable 9, Accounts Receivable 78,571 69,651 64, Accounts Receivable - Related Parties 988 1,355 1, Unbilled Revenues 54,980 41,754 25, Provision for Uncollectibles (13,799) (12,570) (9,778) 20 Natural Gas in Storage, average cost 14,932 11,621 14, Materials and Supplies, average cost Deferred Income Taxes - Net Prepaid Taxes 38,326 16,428 21, Derivatives - Energy Related Assets 7,327 5,434 1, Other Prepayments and Current Assets 12,670 13,853 13, Total Current Assets 196, , , Regulatory and Other Noncurrent Assets: 30 Regulatory Assets 469, , , Unamortized Debt Issuance Costs Long-Term Receivables 25,851 25,758 24, Derivatives - Energy Related Assets Other 17,372 3,033 2, Total Regulatory and Other Noncurrent Assets 512, , , Total Assets $ 2,865,974 $ 2,551,923 $ 2,281,576

128 SMG-5 Page 2 of 2 SOUTH JERSEY GAS COMPANY BALANCE SHEETS - LIABILITIES & CAPITALIZATION AT END OF PERIODS INDICATED (In Thousands) Line No. Capitalization and Liabilities December 31, Common Equity: 2 Common Stock, Par Value $2.50 per share: 3 Authorized - 4,000,000 shares 4 Outstanding - 2,339,139 shares $ 5,848 $ 5,848 $ 5,848 5 Other Paid-In Capital and Premium on Common Stock 355, , ,827 6 Accumulated Other Comprehensive Loss (25,997) (14,934) (12,862) 7 Retained Earnings 585, , , Total Common Equity 921, , , Long-Term Debt 758, , , Total Capitalization 1,679,485 1,263,077 1,285, Current Liabilities: 16 Notes Payable 52, , , Current Portion of Long-Term Debt 63, ,909 27, Accounts Payable - Commodity 43,341 23,815 8, Accounts Payable - Other 41,365 45,370 40, Accounts Payable - Related Parties 17,029 11,216 7, Derivatives - Energy Related Liabilities 9,270 1,372 5, Derivatives-Other Current Deferred Income Taxes - Net Customer Deposits and Credit Balances 41,656 45,816 19, Environmental Remediation Costs 66,040 45,018 48, Taxes Accrued 1, , Pension Benefits 2,353 2,428 2, Interest Accrued 7,615 5,369 5, Other Current Liabilities 7,026 8,011 5, Total Current Liabilities 353, , , Regulatory and Other Noncurrent Liabilities: 34 Regulatory Liabilities 287,105 49,121 42, Deferred Income Taxes - Net 280, , , Environmental Remediation Costs 105, ,029 74, Asset Retirement Obligations 58,714 58,674 57, Pension and Other Postretirement Benefits 88,870 81,800 65, Investment Tax Credits Derivatives - Energy Related Liabilities Derivatives - Other 6,639 6,979 7, Other 4,935 4,970 6, Total Regulatory and Other Noncurrent Liabilities 832, , , Total Capitalization and Liabilities $ 2,865,974 $ 2,551,923 $ 2,281,576

129 SMG-6 SOUTH JERSEY GAS COMPANY STATEMENTS OF INCOME FOR THE PERIODS INDICATED (In Thousands) Twelve Months Ended December 31, Line No. 1 Operating Revenues $ 517,254 $ 461,055 $ 534, Operating Expenses: 4 Cost of Sales (Excluding depreciation) 204, , ,290 5 Operations 98,992 95, ,836 6 Maintenance 19,727 17,549 16,183 7 Depreciation 53,887 47,432 41,365 8 Energy and Other Taxes 3,729 3,620 4, Total Operating Expenses 380, , , Operating Income 136, , , Other Income and Expense: 15 Other Income and Expense 6,475 3,831 3, Total Other Income & Expense Net 6,475 3,831 3, Interest Charges (24,705) (17,875) (19,906) Income Taxes (45,700) (39,366) (36,945) Net Income $ 72,557 $ 69,045 $ 66,578

130 SOUTH JERSEY GAS COMPANY BALANCE SHEET - ASSETS AT MOST RECENT PERIOD CERTIFIED (In Thousands) SMG-7 Page 1 of 2 December 31, Line 2017 No. Assets 1 Property, Plant and Equipment: 2 Utility Plant, at original cost $ 2,652,244 3 Accumulated Depreciation (498,161) 4 5 Property, Plant and Equipment - Net 2,154, Investments: 8 Available-for-Sale Securities - 9 Restricted Investments 2, Total Investments 2, Current Assets: 14 Cash and Cash Equivalents 1, Accounts Receivable 78, Accounts Receivable - Related Parties Unbilled Revenues 54, Provision for Uncollectibles (13,799) 19 Natural Gas in Storage, average cost 14, Materials and Supplies, average cost Deferred Income Taxes - Net - 22 Prepaid Taxes 38, Derivatives - Energy Related Assets 7, Other Prepayments and Current Assets 12, Total Current Assets 196, Regulatory and Other Noncurrent Assets: 29 Regulatory Assets 469, Unamortized Debt Issuance Costs - 31 Long-Term Receivables 25, Derivatives - Energy Related Assets 5 33 Other 17, Total Regulatory and Other Noncurrent Assets 512, Total Assets $ 2,865,974

131 SOUTH JERSEY GAS COMPANY BALANCE SHEET - LIABILITIES & CAPITALIZATION AT MOST RECENT PERIOD CERTIFIED (In Thousands) SMG-7 Page 2 of 2 December 31, Line 2017 No. Capitalization and Liabilities 1 Common Equity: 2 Common Stock, Par Value $2.50 per share: 3 Authorized - 4,000,000 shares 4 Outstanding - 2,339,139 shares $ 5,848 5 Other Paid-In Capital and Premium on Common Stock 355,744 6 Accumulated Other Comprehensive Loss (25,997) 7 Retained Earnings 585, Total Common Equity 921, Long-Term Debt 758, Total Capitalization 1,679, Current Liabilities: 16 Notes Payable 52, Current Portion of Long-Term Debt 63, Accounts Payable - Commodity 43, Accounts Payable - Other 41, Accounts Payable - Related Parties 17, Derivatives - Energy Related Liabilities 9, Derivatives - Other Current Deferred Income Taxes - Net - 24 Customer Deposits and Credit Balances 41, Environmental Remediation Costs 66, Taxes Accrued 1, Pension Benefits 2, Interest Accrued 7, Dividends Declared - 30 Other Current Liabilities 7, Total Current Liabilities 353, Regulatory and Other Noncurrent Liabilities: 35 Regulatory Liabilities 287, Deferred Income Taxes - Net 280, Environmental Remediation Costs 105, Asset Retirement Obligations 58, Pension and Other Postretirement Benefits 88, Investment Tax Credits - 41 Derivatives - Energy Related Liabilities Derivatives - Other 6, Other 4, Total Deferred Credits and Other Noncurrent Liabilities 832, Commitments and Contingencies Total Capitalization and Liabilities $ 2,865,974

132 SMG-8 South Jersey Gas Company Intrastate Gas Revenue By Customer Class As of December 31, 2017 ($000's) Customer Class Total Revenue Residential $ 283,882 Commercial $ 97,079 Industrial $ 25,043 Street & Yard Lighting $ 81 Total $ 406,085

133 SMG-9 SOUTH JERSEY GAS COMPANY PAYMENTS AND ACCRUALS TO AFFILIATED COMPANIES FOR THE PERIODS INDICATED Twelve Months Ended December 31, MILLENNIUM ACCOUNT SERVICES, LLC (meter reading services) $ 2,974,066 $ 2,897,290 $ 2,763,014 SOUTH JERSEY INDUSTRIES, INC. (corporate support) a 90,443,586 53,058,046 85,963,307 SOUTH JERSEY ENERGY SERVICE PLUS (heater conversion installations) 46, , ,911 SOUTH JERSEY ENERGY COMPANY (billing services remittances) 18,851,109 18,685,527 26,215,786 SOUTH JERSEY ENERGY SOLUTIONS, LLC (accounting support) 229,621 63,023 54,591 SOUTH JERSEY RESOURCES GROUP, LLC (commodity purchases) 22,578,608 21,126,043 26,171,816 (a) SOUTH JERSEY INDUSTRIES, INC. includes the following major pass-through items: COMMON DIVIDENDS 20,000, ,764,038 FEDERAL INCOME TAXES K PLAN CONTRIBUTIONS 5,191,812 4,956,488 5,116,523 PENSION PLAN CONTRIBUTIONS 7,996, ,020,143 BENEFITS 4,329,674 3,924,142 2,822,000 Subtotal of Major Pass-Through Items 37,517,986 8,880,631 60,722,704

134 SMG-10 South Jersey Gas Company Energy Efficiency Program Accounting Entries Debit Credit To Record Regulatory Asset 182 Program Investment Regulatory Asset XXX 131 Cash XXX To Record Incremental O&M 907 Program O&M Expense XXX 131 Cash XXX To Amortize Regulatory Asset 907 Program Investment Amortization Account XXX 182 Program Investment Regulatory Asset XXX To Record Recovery of Regulatory Asset 131 Cash XXX 484 Clause Revenue XXX 484 Clause Revenue XXX 182 Regulatory Asset XXX To Record Over/Under Recovery 182 Regulatory Asset XXX 484 Regulatory Debit XXX 484 Regulatory Credit XXX 253 Regulatory Liability XXX To Record Carrying Costs on Under/(Over) Recovered Balance 182 Regulatory Asset XXX 419 Other Income XXX 253 Regulatory Liability XXX 419 Other Income XXX To Record Loan Repayment (Reduction to the Regulatory Asset) 131 Cash XXX 907 Customer Loan Expense XXX 907 Customer Loan Expense XXX 182 Regulatory Asset XXX

135 SMG-11 Page 1 of 2 South Jersey Gas Company Energy Efficiency Program Extension (EET IV) Pro Forma Income Statement (Program Year) Year 1 Year 2 Year 3 Operating Revenues $ 5,172,458 $ 8,248,456 $ 10,885,568 Incremental O&M Expense $ (4,458,721) $ (5,402,784) $ (5,363,608) Margin $ 713,737 $ 2,845,672 $ 5,521,960 Amortization of Program Investment $ (148,075) $ (732,323) $ (1,541,416) Operating Income $ 565,662 $ 2,113,349 $ 3,980,544 Interest Expense $ (135,651) $ (618,501) $ (1,221,466) Income Before Income Taxes $ 430,011 $ 1,494,848 $ 2,759,078 Income Tax Expense (28.11%) $ (120,876) $ (420,202) $ (775,577) Net Income $ 309,135 $ 1,074,646 $ 1,983,501

136 SMG-11 Page 2 of 2 South Jersey Gas Company Energy Efficiency Program Extension (EET IV) Pro Forma Balance Sheet (Program Year) Year 1 Year 2 Year 3 Assets Cumulative Investment $ 13,937,352 $ 38,491,946 $ 69,443,738 Less Accumulated Amortization $ (148,075) $ (880,399) $ (2,421,815) Net Investment $ 13,789,277 $ 37,611,547 $ 67,021,923 Deferred Tax $ (1,733,600) $ (4,774,320) $ (8,326,230). Total Asset $ 12,055,676 $ 32,837,227 $ 58,695,694 Liabilities & Capitalization Deferred Income Tax $ (1,733,600) $ (4,774,320) $ (8,326,230) Total Capitalization $ 13,789,277 $ 37,611,547 $ 67,021,923 Total Liabilities & Capitalization $ 12,055,676 $ 32,837,227 $ 58,695,694

137 SMG-12 Page 1 of 2 South Jersey Gas Company Energy Efficiency Program Extension (EET IV) Annual Bill Summary Proposed Residential Non Heat Sales (210 Therms) Proposed Residential Heat Sales (727 Therms) Cumulative Cumulative Program Year Rate Annual Bill Change ($) Change (%) Change (%) Annual Bill Change ($) Change (%) Change (%) Current Bill $ $ $1, Year 1 $ $ $ % 0.6% $1, $ % 0.8% Year 2 $ $ $ % 1.0% $1, $ % 1.2% Year 3 $ $ $ % 1.3% $1, $ % 1.6% Year 4 $ $ $ % 1.7% $1, $ % 2.1% Year 5 $ $ $ % 2.1% $1, $ % 2.5% Year 6 $ $ ($0.20) -0.1% 2.0% $1, ($0.69) -0.1% 2.5% Year 7 $ $ ($1.32) -0.3% 1.7% $1, ($4.59) -0.4% 2.0% Year 8 $ $ ($0.85) -0.2% 1.4% $1, ($2.93) -0.3% 1.8% Year 9 $ $ ($0.63) -0.2% 1.3% $1, ($2.18) -0.2% 1.6% Year 10 $ $ ($0.54) -0.1% 1.1% $1, ($1.89) -0.2% 1.4% Year 11 $ $ ($0.46) -0.1% 1.0% $1, ($1.58) -0.1% 1.2% Year 12 $ $ ($0.35) -0.1% 0.9% $1, ($1.20) -0.1% 1.1% Year 13 $ $ ($0.23) -0.1% 0.9% $1, ($0.81) -0.1% 1.0% Proposed General Service Sales (3,595 Therms) Proposed General Service Large Volume Sales (178,885 Therms) Cumulative Cumulative Effective Date Rate Annual Bill Change ($) Change (%) Change (%) Annual Bill Change ($) Change (%) Change (%) Current Bill $ $4, $94, Year 1 $ $4, $ % 0.9% $96, $2, % 2.2% Year 2 $ $4, $ % 1.4% $97, $1, % 3.5% Year 3 $ $4, $ % 1.9% $98, $1, % 4.6% Year 4 $ $4, $ % 2.4% $99, $1, % 5.8% Year 5 $ $4, $ % 2.9% $101, $1, % 7.1% Year 6 $ $4, ($3.43) -0.1% 2.9% $100, ($170.30) -0.2% 6.9% Year 7 $ $4, ($22.69) -0.5% 2.4% $99, ($1,129.48) -1.1% 5.7% Year 8 $ $4, ($14.49) -0.3% 2.1% $98, ($721.09) -0.7% 4.9% Year 9 $ $4, ($10.79) -0.2% 1.8% $98, ($536.83) -0.5% 4.4% Year 10 $ $4, ($9.38) -0.2% 1.6% $97, ($466.54) -0.5% 3.9% Year 11 $ $4, ($7.80) -0.2% 1.4% $97, ($388.36) -0.4% 3.5% Year 12 $ $4, ($5.90) -0.1% 1.3% $97, ($293.73) -0.3% 3.1% Year 13 $ $4, ($4.02) -0.1% 1.2% $97, ($200.17) -0.2% 2.9%

138 SMG-12 Page 2 of 2 South Jersey Gas Company Energy Efficiency Program Extension (EET IV) Annual Bill Summary Proposed Comprehensive Firm Trans Service Proposed Large Volume Service Effective Date Rate Annual Bill Change ($) Change (%) Cumulative Change (%) Annual Bill Change ($) Change (%) Cumulative Change (%) Current Bill $ $91, $343, Year 1 $ $94, $3, % 3.6% $349, $6, % 1.8% Year 2 $ $96, $1, % 5.7% $352, $3, % 2.8% Year 3 $ $97, $1, % 7.5% $355, $3, % 3.7% Year 4 $ $99, $1, % 9.5% $359, $3, % 4.7% Year 5 $ $101, $1, % 11.6% $362, $3, % 5.7% Year 6 $ $101, ($269.73) -0.3% 11.3% $362, ($503.50) -0.1% 5.6% Year 7 $ $99, ($1,788.95) -1.8% 9.3% $358, ($3,339.38) -0.9% 4.6% Year 8 $ $98, ($1,142.11) -1.1% 8.1% $356, ($2,131.94) -0.6% 4.0% Year 9 $ $97, ($850.28) -0.9% 7.1% $355, ($1,587.18) -0.4% 3.5% Year 10 $ $96, ($738.92) -0.8% 6.3% $353, ($1,379.33) -0.4% 3.1% Year 11 $ $96, ($615.12) -0.6% 5.7% $352, ($1,148.21) -0.3% 2.8% Year 12 $ $95, ($465.23) -0.5% 5.2% $351, ($868.43) -0.2% 2.6% Year 13 $ $95, ($317.04) -0.3% 4.8% $351, ($591.82) -0.2% 2.4% Proposed Electric Generation Service Proposed Electric Generation Service Large Volume Cumulative Cumulative Effective Date Rate Annual Bill Change ($) Change (%) Change (%) Annual Bill Change ($) Change (%) Change (%) Current Bill $ $199, $847, Year 1 $ $202, $3, % 1.6% $863, $16, % 1.9% Year 2 $ $204, $1, % 2.6% $873, $9, % 3.0% Year 3 $ $206, $1, % 3.4% $881, $8, % 4.0% Year 4 $ $208, $1, % 4.3% $890, $9, % 5.1% Year 5 $ $209, $1, % 5.3% $900, $9, % 6.2% Year 6 $ $209, ($269.73) -0.1% 5.2% $898, ($1,348.66) -0.1% 6.1% Year 7 $ $207, ($1,788.95) -0.9% 4.3% $889, ($8,944.77) -1.0% 5.0% Year 8 $ $206, ($1,142.11) -0.5% 3.7% $884, ($5,710.54) -0.6% 4.3% Year 9 $ $205, ($850.27) -0.4% 3.3% $879, ($4,251.38) -0.5% 3.8% Year 10 $ $205, ($738.93) -0.4% 2.9% $876, ($3,694.64) -0.4% 3.4% Year 11 $ $204, ($615.11) -0.3% 2.6% $873, ($3,075.57) -0.4% 3.0% Year 12 $ $204, ($465.23) -0.2% 2.4% $870, ($2,326.14) -0.3% 2.8% Year 13 $ $203, ($317.05) -0.2% 2.2% $869, ($1,585.24) -0.2% 2.6%

139 SMG-13 Page 1 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 6 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 6 APPLICABLE TO USE OF SERVICE FOR: RESIDENTIAL SERVICE (RSG) All residential purposes. Customer may elect Firm Sales Service or Firm Transportation Service. To be eligible for Firm Transportation Service RSG, a customer must hold clear and marketable title to gas that is made available for delivery to the customer s residence on the Company s system. CHARACTER OF SERVICE Firm Sales Service and Firm Transportation Service. MONTHLY RATE: (1) Customer Charge: $ per month Delivery Charge: (a) (b) Residential Non-Heating Customers Firm Sales Service and Firm Transportation Service Residential Heating Customers Firm Sales Service and Firm Transportation Service $ per therm $ per therm Basic Gas Supply Service ( BGSS ) Charge: All consumption for customers who elect Firm Sales Service. See Rider A of this Tariff. APPLICABLE RIDERS: Basic Gas Supply Service Clause: BGSS charges are depicted in Rider A of this Tariff. Transportation Initiation Clause: Societal Benefits Clause: Temperature Adjustment Clause: The rates set forth above have been adjusted, as is appropriate, pursuant to Rider C of this Tariff. The rates set forth above have been adjusted, as is appropriate, pursuant to Rider E of this Tariff. The rates set forth above have been adjusted, as is appropriate, pursuant to Rider F of this Tariff. (1) Please refer to Appendix A for components of Monthly Rates and Price to Compare Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

140 SMG-13 Page 2 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 10 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 10 GENERAL SERVICE (GSG) APPLICABLE TO USE OF SERVICE FOR: All Commercial and Industrial Customers who would not qualify for any other Rate Schedule. A customer qualifying for service under Rate Schedule GSG may elect either Firm Sales Service or Firm Transportation Service. To be eligible for Firm Transportation Service under this Rate Schedule GSG, a customer must hold clear and marketable title to gas that is made available for delivery to customer s facility on the Company s system. CHARACTER OF SERVICE: Firm Sales Service or Firm Transportation Service. MONTHLY RATE: (1) Customer Charge: $ per month Delivery Charges: Firm Sales Service and Firm Transportation Service $ per therm Basic Gas Supply Service ( BGSS ) Charge: All consumption for customers who elect Firm Sales Service See Rider A of this Tariff. LINE LOSS: Line Loss shall be 1.43% as provided in Special Provision (o). APPLICABLE RIDERS: Basic Gas Supply Service Clause: BGSS charges are depicted in Rider A of this Tariff. Transportation Initiation Clause: Societal Benefits Clause: Temperature Adjustment Clause: The rates set forth above have been adjusted, as is appropriate, pursuant to Rider C of this Tariff. The rates set forth above have been adjusted, as is appropriate, pursuant to Rider E of this Tariff. The rates set forth above have been adjusted, as is appropriate, pursuant to Rider F of this Tariff. (1) Please refer to Appendix A for components of Monthly Rates and Price to Compare. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

141 SMG-13 Page 3 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 14 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 14 APPLICABLE TO USE OF SERVICE FOR: GENERAL SERVICE LARGE VOLUME (GSG-LV) All Commercial and Industrial Customers who would not qualify for any other Rate Schedule (other than Rate Schedule GSG), and who has an annualized usage of 100,000 therms or more,. A customer qualifying for service under Rate Schedule GSG-LV may elect either Firm Sales Service or Firm Transportation Service. To be eligible for Firm Transportation Service under this Rate Schedule GSG-LV, a customer must hold clear and marketable title to gas that is made available for delivery to customer s facility on the Company s system. CHARACTER OF SERVICE: Firm Sales Service or Firm Transportation Service. MONTHLY RATE: (1) Customer Charge: $ per month Delivery Charges: Firm Sales Service and Firm Transportation Service (2) Demand Charge: Volumetric Charge: D-1FT: $ per Mcf of Contract Demand $ per therm Basic Gas Supply Service ( BGSS ) Charge: All consumption for customers who elect Firm Sales Service See Rider A of this Tariff. LINE LOSS: Line Loss shall be 1.43% as provided in Special Provision (o). (1) Please refer to Appendix A for components of Monthly Rates and Price to Compare. (2) See Special Provision (p) of this Rate Schedule GSG-LV, regarding appropriate balancing charges. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

142 SMG-13 Page 4 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 18 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 18 APPLICABLE TO USE OF SERVICE FOR: COMPREHENSIVE TRANSPORTATION SERVICE (CTS) All customers having a Firm Contract Demand, and an average annual daily Firm usage of 100 Mcf per day or more. To be eligible for service under this Rate Schedule CTS, a customer must hold clear and marketable title to gas that is made available for delivery to customer s facility on the Company s system. Provided, however, that any customer receiving service under this Rate Schedule CTS prior to August 29, 2003 shall continue to be eligible to receive service under this Rate Schedule CTS, notwithstanding the foregoing, if said customers continues to have a Firm Contract Demand of 100 Mcf per day or more. Further provided, however, that if a customer ceases to receive service under this Rate Schedule CTS, and seeks to return to service under this Rate Schedule CTS, said customer must meet all requirements for eligibility as though applying for service in the first instance. CHARACTER OF SERVICE: Firm Transportation Service and Limited Firm Transportation Service MONTHLY RATE: (1) Firm: Customer Charge: $ per month Delivery Charges: Limited Firm: Demand Charge: D-1FT: $ per Mcf of Contract Demand Volumetric Charges: All consumption for customers who elected to transfer from Sales Service to Firm Transportation Service $ per therm Customer Charge: $ per month Delivery Charges: Volumetric Charges: All consumption for customers who elected to transfer from Sales Service to Firm Transportation Service $ per therm (1) Please refer to Appendix A for components of Monthly Rates. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

143 SMG-13 Page 5 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 25 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 25 APPLICABLE TO USE OF SERVICE FOR: LARGE VOLUME SERVICE (LVS) Firm Sales Service and Firm Transportation Service pursuant to this Rate Schedule LVS, shall be available to all Industrial Customers with a Contract Demand and a minimum annualized average use of 200 Mcf per day. To be eligible for Firm Transportation Service under this Rate Schedule LVS, a customer must hold clear and marketable title to gas that is made available for delivery to customer s facility on the Company s system. CHARACTER OF SERVICE: Firm Sales Service, Limited Firm Sales Service, Firm Transportation Service, and Limited Firm Transportation Service. MONTHLY RATE: (1) Firm: Customer Charge: Delivery Charge: $ per month Firm Sales Service and Firm Trasnportation Service Demand Charge: Volumetric Charge: D-1FT: $ per Mcf of Contract Demand $ per therm Basic Gas Supply Service ( BGSS ) Charge: Demand Charge: Volumetric Charge: D-2: $ per Mcf of Contract Demand. See Rider A of this Tariff. (1) Please refer to Appendix A for components of Monthly Rates. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

144 SMG-13 Page 6 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 26 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 26 LARGE VOLUME SERVICE (LVS) (Continued) Limited Firm: Customer Charge: $ per month Delivery Charge: Firm Sales Service and Firm Transportation Volumetric Charge: $ per therm Basic Gas Supply Service ( BGSS ) Charge: Applicable to customers who elect Firm Sales Service Volumetric Charge: See Rider A of this Tariff. PRICE TO COMPARE: The Company will provide the Price to Compare for an LVS customer, at said customer s request. LINE LOSS: Line Loss shall be 1.43% as provided in Special Provision (h). MINIMUM BILL: Sum of monthly Customer Charge and monthly Demand Charges, irrespective of use. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

145 SMG-13 Page 7 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 31 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 31 FIRM ELECTRIC SERVICE (FES) APPLICABLE TO USE OF SERVICE FOR: All gas that is purchased or transported to generate electricity. Provided, however, that in order to qualify for this Rate Schedule FES, a customer must have a Winter Daily Contract Demand of 1,000 Mcf per day or more, or a Summer Daily Contract Demand of 2,000 Mcf per day or more, or both. To be eligible for Firm Transportation Service under this Rate Schedule FES, a customer must hold clear and marketable title to gas that is made available for delivery to customer s facility on the Company s system. CHARACTER OF SERVICE: Firm Sales Service and Firm Transportation Service. MONTHLY RATE (1) (2) WINTER (November March): Demand Charge: D-1 $ per Mcf of Winter Daily Contract Demand D-2 $ per Mcf of Daily Billing Determinant or $0 for Firm Transportation customers Volumetric Charge: C-1: $ per therm of consumption C-2: FES Monthly Commodity Rate, pursuant to Rider A and Special Provision (x), OR Customer Owned Gas Clause, Rider D C-3: $ per therm of consumption C-4: Escalator Rate Charge may change monthly pursuant to Standard Gas Service Addendum. Minimum Bill: The monthly D-1 and D-2 charges, irrespective of use. SUMMER (April October): Demand Charge: D-1 $ per Mcf of Summer Daily Contract Demand D-2 $ per Mcf of Daily Billing Determinant or $0 for Firm Transportation customers Volumetric Charge: C-1: $ per therm of consumption C-2: FES Monthly Commodity Rate, pursuant to Rider A and Special Provision (x), OR Customer Owned Gas Clause, Rider D C-3: $ per therm of consumption C-4: Escalator Rate Charge may change monthly pursuant to Standard Gas Service Addendum. (1) Please refer to Appendix A for components of Monthly Rates. (2) Please refer to Special Provision (p) Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

146 SMG-13 Page 8 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 38 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 38 APPLICABLE TO USE OF SERVICE FOR: ELECTRIC GENERATION SERVICE (EGS) Residential, commercial and industrial uses for electric generation facilities (excluding back-up generator equipment); all Prime Movers; and all engine driven equipment (whether or not used for electric generation). Provided, however, that in order to be eligible for this Rate Schedule EGS, a customer must have a Firm Daily Contract Demand of less than 200 Mcf per day; provided, however, that a residential EGS customer will have no Firm Daily Contract Demand. To be eligible for Firm Transportation Service under this Rate Schedule EGS, a customer must hold clear and marketable title to gas that is made available for delivery to customer s facility on the Company s system. CHARACTER OF SERVICE: Firm Sales Service and Firm Transportation Service MONTHLY RATE: (1)(2) Residential Customer Charge: $ per month Residential Delivery Charge Residential Volumetric Charge: $ per therm Commercial and Industrial Customer Charge: $ per month Commercial and Industrial Delivery Charge: Commercial and Industrial Demand Charge: D-1 Charge: $ per Mcf of contract Volumetric Charges: Winter Season (effective during billing months of November through March): All Consumption for Firm Sales Service and Firm Transportation Service $ per therm (1) Please refer to Appendix A for components of Monthly Rates. (2) See Special Provision (k) of this Rate Schedule EGS, regarding appropriate balancing charges. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

147 SMG-13 Page 9 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 39 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 39 ELECTRIC GENERATION SERVICE (EGS) (Continued) Summer Season (effective during billing months of April through October): All Consumption for Firm Sales Service and Firm Transportation Service $ per therm Basic Gas Supply Service ( BGSS ) Charge: Applicable to customers who elect Firm Sales Service See Rider A of this Tariff. LINE LOSS: Line Loss shall be 1.43% as provided in Special Provision (p). APPLICABLE RIDERS: Basic Gas Supply Service Clause: Societal Benefits Clause: Balancing Service Clause Energy Efficiency Tracker: BGSS charges are depicted in Rider A of this Tariff. The rates set forth above have been adjusted, as is appropriate, pursuant to Rider E of this Tariff. The rates set forth above have been adjusted, as is appropriate, pursuant to Rider J of this Tariff. However, also see Special Provision (k) regarding Rider I. The rates set forth above have been adjusted, as is appropriate, pursuant to Rider N of this Tariff. TERMS OF PAYMENT: Payment of all bills must be received in full at the Company's designated office within fifteen (15) days of the billing date; provided however, the Company shall take into account any postal service delays of which the Company is advised. If the fifteenth (15th) day falls on a non-business day, the due date shall be extended to the next business day. Should the customer fail to make payment as specified, the Company may, beginning on the twenty-sixth (26th) day, assess simple interest at a rate equal to the prime rate as published in the Money Rates column in The Wall Street Journal. A late payment charge shall not be assessed on a residential customer, or on State, county or municipal government entities. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

148 SMG-13 Page 10 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 43 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 43 ELECTRIC GENERATION SERVICE LARGE VOLUME (EGS-LV) APPLICABLE TO USE OF SERVICE FOR: All commercial and industrial electric generation facilities; all Prime Movers and all engine driven equipment (whether or not used for electric generation). Provided, however, that in order to be eligible for this Rate Schedule EGS-LV, a customer must have a Firm Daily Contract Demand of 200 Mcf per day or more. To be eligible for Firm Transportation Service under this Rate Schedule EGS-LVS, a customer must hold clear and marketable title to gas that is made available for delivery to customer s facility on the Company s system. CHARACTER OF SERVICE: Firm Sales Service, Firm Transportation Service, Limited Firm Sales Service and Limited Firm Transportation Service. MONTHLY RATE: (1) Customer Charge: $ per month FIRM: Demand Charges: (2) D-1 $ per Mcf of Firm Daily Contract Demand. D-2 $ per Mcf of Firm Daily Contract Demand or $0 for Firm Transportation customers. Volumetric Charge: C-1: $ per therm of consumption C-2: As depicted in the Monthly BGSS Subrider of Rider A of this Tariff, OR Customer Owned Gas Clause, Rider D Minimum Bill: Monthly D-1 and D-2 charges, irrespective of use. LIMITED FIRM: Demand Charge: D-2 $ per Mcf of Limited Firm Daily Contract Demand or $0 for Limited Firm Transportation customers Volumetric Charge: (2) C-1: $ per therm of consumption C-2: As depicted in the Monthly BGSS Subrider of Rider A of this Tariff, OR Customer Owned Gas Clause, Rider D C-3 $ per therm for all consumption within Limited Firm Contract Demand level. 1 (1) Please refer to Appendix A for components of Monthly Rates. (2) Please refer to Special Provision (j). Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

149 SMG-13 Page 11 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 60 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 60 APPLICABLE TO: NATURAL GAS VEHICLE (NGV) This service will be available to Commercial and Industrial customers who will utilize natural gas, for the purpose of providing vehicle fuel at Company-operated fueling stations or at separately metered customeroperated fueling stations. CHARACTER OF SERVICE: Firm Sales Service or Firm Transportation Service COMPRESSED NATURAL GAS VEHICLE SERVICE AT COMPANY OPERATED FUELING STATIONS This part of the service is available for refueling vehicles with compressed natural gas to customers who refuel at Company operated fueling stations. All service at Company operated fueling stations shall be Firm Sales Service. Provided, however, that in the Company s sole discretion, it may allow for Firm Transportation service for a Customer-specific dedicated dispenser or time fill system (separately metered) at a Company operated fueling station. Rate for Monthly Consumption Volumetric Charge C-1: $ per therm ($ GGE*) Distribution Charge: $ per therm ($ GGE*) Compression Charge: $ per therm ($ GGE*) Commodity Charges All consumption for customers who elected Firm Sales Service Basic Gas Supply Service ( BGSS ) Charge: See Rider A of this Tariff. BGSS rate * GGE Factor 1.25 = GGE GGE indicates Gasoline Gallon Equivalent. The gasoline gallon equivalent shall be determined in accordance with local standards. The point of sale price to the Customer shall be displayed in gasoline gallon equivalents at public access dispensers at Company operated fueling stations, and shall be calculated as C-1 + Distribution Charge + Compression Charge + New Jersey Motor Vehicle Fuel Tax + Federal Excise Tax + BGSS. Commodity charges do not include State of New Jersey Motor vehicle fuel tax and Federal Excise Tax. As of July 1, 2011 these taxes were $ and $0.183 per gallon, respectively and shall be charged at the prevailing rate when applicable. The Company is under no obligation to determine if a customer is exempt from taxation. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

150 SMG-13 Page 12 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 61 B.P.U.N.J. No GAS Superseding Third Revised Sheet No. 61 NATURAL GAS VEHICLE (NGV) (Continued) NATURAL GAS VEHICLE SERVICE AT CUSTOMER OPERATED FUELING STATIONS This part of the service is available for the sale of separately metered uncompressed gas for the use of the customer solely as a vehicle fuel as follows: The customer agrees to obtain and maintain, at its expense, all necessary certificates, licenses and regulatory approvals and pay all taxes levied on the gas compressed for refueling the customer s vehicles; If the customer provides natural gas for resale as a motor fuel, the customer will be responsible for collecting and paying all applicable taxes on the gas compressed for resale and on the sale thereof and for the metering of such sale in accordance with local standards and regulations; and The customer must execute a Standard Gas Service Agreement (NGV) for not less than 12 months and must produce evidence of Land Rights. Rate for Monthly Consumption Monthly Customer Charge The monthly customer charge shall be determined in accordance with the maximum delivery capability requested by the customer Cf/hour $ ,000-4,999 Cf/hour $ ,000-24,999 Cf/hour $ ,000 and greater Cf/hour $ Volumetric Charges C-1: $ per therm ($ GGE) Distribution Charge: $ per therm ($ GGE) Basic Gas Supply Service ( BGSS ) Charge: All consumption for customers who elect Firm Sales Service See Rider A of this Tariff. Facilities Charge All consumption for Customers that elect to have the Company construct Compressed Natural Gas ( CNG ) fueling facilities located on Customer s property: C-2: $ ($ GGE) The customer shall pay all related motor vehicle taxes directly to the taxing entity. Such taxes shall be incremental to charges paid to the Company for the cost of receiving service under this rate schedule. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

151 SMG-13 Page 13 of 28 SOUTH JERSEY GAS COMPANY Fourth Revised Sheet No. 62 B.P.U.N.J. No. 12 GAS Superseding Third Revised Sheet No. 62 NATURAL GAS VEHICLE (NGV) (Continued) DELIVERY SERVICE FOR NATURAL GAS VEHICLES This part of service is available for delivery of customer owned natural gas for use in compression and dispensing equipment at the Customer s premises, as follows: The customer must purchase under a contract with an initial term of not less than one year an adequate supply of natural gas of a quality acceptable to the Company, and must make arrangements by which such volumes of natural gas can be delivered into the Company s distribution system at the Customer s expense. By taking service under this part, the Customer warrants that it has good and legal title to all gas supplied to the Company, and agrees to indemnify, defend and hold the Company harmless from any loss, claims or damages in regard to such title. Rate for Delivery Service Monthly Customer Charge The monthly customer charge shall be determined in accordance with the maximum delivery capability requested by the customer Cf/hour $ ,000-4,999 Cf/hour $ ,000-24,999 Cf/hour $ ,000 and greater Cf/hour $ Volumetric Charge C-1: $ per therm ($ GGE) Distribution Charge: $ per therm ($ GGE) Facilities Charge All consumption for Customers that elect to have the Company construct CNG fueling facilities located on Customer s property: C-2: $ per therm ($ GGE) Sales taxes are not included in the above basic charges. The Company is under no obligation to determine if a customer is exempt from taxation. Customers seeking tax exemption must file verification with the Company. Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No. of the Board of Public Utilities, State of New Jersey, dated

152 SMG-13 Page 14 of 28 SOUTH JERSEY GAS COMPANY Third Revised Sheet No. 105 B.P.U.N.J. No GAS Superseding Second Revised Sheet No. 105 RIDER N ENERGY EFFICIENCY TRACKER ( EET ) APPLICABLE TO: Rate Schedule RSG - Residential Rate Schedule GSG - General Service Rate Schedule GSG-LV - General Service- Large Volume Rate Schedule CTS - Comprehensive Transportation Service Rate Schedule LVS - Large Volume Service Rate Schedule FES - Firm Electric Service Rate Schedule EGS - Electric Generation Service Rate Schedule EGS-LV - Electric Generation Service- Large Volume Rate Schedule IGS - Interruptible Gas Service Rate Schedule ITS - Interruptible Transportation Service Rate Schedule NGV - Natural Gas Vehicle This Rider N shall be known as the Energy Efficiency Tracker ( EET ). For financial accounting purposes the Company shall record a return on and a return of investments in energy efficiency programs, as approved by the Board at Docket No. GO , in an Order dated July 24, 2009, Docket No. GO , in an Order dated June 21, 2003 and Docket No. GR , in an Order dated August 19, 2015 and recover all incremental operating and maintenance expenses of the programs, subject to the EET. The calculation will use the weighted average cost of capital as identified in the respective Orders referenced above. The EET rate will be calculated annually using projected data and subject to a true-up at the end of the EET year (September 30 th ) with simple interest on net over/under recoveries. Interest associated with over recoveries will be credited against the EET, while interest associated with under recoveries will be charged to the EET. The interest on monthly EET under and over recoveries shall be the interest rate based on the Company s weighted interest rate for the corresponding month obtained on its commercial paper and bank credit lines but shall not exceed the Company s weighted average cost of capital utilized to set rates in its most recent base rate case. This EET will be effectuated through a volumetric rate applied to customers bills. The Company shall make an annual EET rate filing in June of each year with a proposed implementation of the revised EET rate in October. Included in the filing will be a list of efficiency programs offered and eligible for recovery under the EET. The Company shall have the discretion to implement a bill credit or a refund at any time during the EET Year with five (5) days notice to the BPU Staff and the Division of Rate Counsel. The Company shall have the discretion to file a selfimplementing EET rate reduction at any time with two (2) weeks notice to the BPU Staff and the Division of Rate Counsel. Rate Schedules subject to this Rider will be charged the following volumetric rate: EET EET IV Total Rate per therm $ $ $ Applicable Revenue Tax $ $ $ Total EET Rate per therm $ $ $ Applicable NJ Sales Tax $ $ $ EET Rate per therm with NJ Sales Tax $ $ $ Issued Effective with service rendered by South Jersey Gas Company, on and after D. Robbins, Jr., President Filed pursuant to Order in Docket No of the Board of Public Utilities, State of New Jersey, dated

153 SMG-13 Page 15 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 1 RESIDENTIAL GAS SERVICE (RSG) - NONHEAT CUSTOMER RIDER RATE PUA NJ SALES TAX TARIFF RATE CUSTOMER CHARGE DELIVERY CHARGE (per therm): Base Rate TIC C SBC: RAC E, G CLEP E, K USF E Total SBC CIP M ( ) ( ) ( ) ( ) EET N Balancing Service Charge BS-1 J Balancing Service Charge BUY-OUT PRICE (Applicable to Transportation Customers Only) J Rate Set Monthly TOTAL DELIVERY CHARGE BGSS: (Applicable To Sales Customers Only) A

154 SMG-13 Page 16 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 2 RESIDENTIAL GAS SERVICE (RSG) - HEAT CUSTOMER RIDER RATE PUA NJ SALES TAX TARIFF RATE CUSTOMER CHARGE DELIVERY CHARGE (per therm): Base Rate TIC C SBC: RAC E, G CLEP E, K USF E Total SBC CIP M EET N Balancing Service Charge BS-1 J Balancing Service Charge BUY-OUT PRICE (Applicable to Transportation Customers Only) J Rate Set Monthly Total Delivery Charge BGSS: (Applicable To Sales Customers Only) A

155 SMG-13 Page 17 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 3 GENERAL SERVICE (GSG) RIDER RATE PUA NJ SALES TAX TARIFF RATE CUSTOMER CHARGE DELIVERY CHARGE (per therm): Base Rate TIC C SBC: RAC E, G CLEP E, K USF E Total SBC CIP M EET N Balancing Service Charge BS-1 J Balancing Service Charge BUY-OUT PRICE (Applicable to Transportation Customers Only) J Rate Set Monthly Total Delivery Charge BGSS: (Applicable To Sales Customers Only using less than 5,000 therms annually) A BGSS: (Applicable To Sales Customers Only using 5,000 therms annually or greater) A RATE SET MONTHLY

156 SMG-13 Page 18 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 4 GENERAL SERVICE-LV (GSG-LV) RIDER RATE PUA NJ SALES TAX TARIFF RATE CUSTOMER CHARGE D-1 Demand Charge (Mcf) DELIVERY CHARGE (per therm): Base Rate TIC C SBC: RAC E, G CLEP E, K USF E Total SBC CIP M ( ) ( ) ( ) ( ) EET N Balancing Service Charge BS-1 J Balancing Service Charge BUY-OUT PRICE (Applicable to Transportation Customers Only) J Rate Set Monthly Total Delivery Charge BGSS: (Applicable Sales Customers Only) A RATE SET MONTHLY

157 SMG-13 Page 19 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 5 COMPREHENSIVE TRANSPORTATION SERVICE (CTS) RIDER RATE PUA NJ SALES TAX TARIFF RATE FIRM CUSTOMER CHARGE D-1 Demand Charge (Mcf) DELIVERY CHARGE (per therm): Base Rate SBC: RAC E, G CLEP E, K USF E Total SBC EET N Total Delivery Charge Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) I BUY-OUT PRICE RATE SET MONTHLY LIMITED FIRM CUSTOMER CHARGE DELIVERY CHARGE (per therm): Base Rate SBC: RAC E, G CLEP E, K USF E Total SBC EET N Total Delivery Charge Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) I BUY-OUT PRICE RATE SET MONTHLY

158 SMG-13 Page 20 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 6 LARGE VOLUME SERVICE (LVS) RIDER RATE PUA NJ SALES TAX TARIFF RATE FIRM CUSTOMER CHARGE D-1 Demand Charge (Mcf) D-2 DEMAND BGSS(Applicable to Sales Customers Only) A DELIVERY CHARGE (per therm): Base Rate SBC: RAC E, G CLEP E, K USF E Total SBC EET N Total Delivery Charge Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) (Applicable to Transportation Customers Only) I Balancing Service Charge CASH OUT CHARGE (CREDIT) (Applicable Transportaton Customers Only) I RATE SET MONTHLY BGSS: (Applicable Sales Customers Only) A RATE SET MONTHLY LIMITED FIRM CUSTOMER CHARGE DELIVERY CHARGE (per therm): Base Rate SBC: RAC E, G CLEP E, K USF E Total SBC EET N Total Delivery Charge Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) (Applicable to Transportation Customers Only) I BUY-OUT PRICE I RATE SET MONTHLY

159 SMG-13 Page 21 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 7 FIRM ELECTRIC SALES (FES) RIDER RATE PUA NJ SALES TAX TARIFF RATE WINTER D-1 DEMAND (MCF) (Rate is negotiated. Shown here is the benchmark rate.) D-2 DEMAND BGSS(MCF) (Applicable to Sales Customers Only) A DELIVERY CHARGE (per therm): SBC: RAC E, G CLEP E, K USF E Total SBC EET N Total Delivery Charge C-3 All Therms (Rate is negotiated. Shown here is the benchmark rate.) C-4 Escalator Rate (To be determined as prescribed in the Company's Tariff) RATE SET MONTHLY Balancing Service Charge CASH OUT CHARGE (CREDIT) (Applicable to Firm Transportatin Customers Only) I RATE SET MONTHLY BGSS: (Applicable To Sales Customers Only) A RATE SET MONTHLY SUMMER D-1 DEMAND (MCF) (Rate is negotiated. Shown here is the benchmark rate.) D-2 DEMAND BGSS(MCF) (Applicable to Sales Customers Only) A SBC: RAC E, G CLEP E, K USF E EET N Total Delivery Charge C-3 All Therms (Rate is negotiated. Shown here is the benchmark rate.) C-4 Escalator Rate (To be determined as prescribed in the Company's Tariff) RATE SET MONTHLY Balancing Service Charge CASH OUT CHARGE (CREDIT) (Applicable to Firm Transportatin Customers Only) I RATE SET MONTHLY BGSS: (Applicable To Sales Customers Only) A RATE SET MONTHLY

160 SMG-13 Page 22 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 8 ELECTRIC GENERATION SERVICE (EGS) - RESIDENTIAL RIDER RATE PUA NJ SALES TAX TARIFF RATE CUSTOMER CHARGE DELIVERY CHARGE (per therm): Base Rate SBC: RAC E, G CLEP E, K USF E Total SBC EET N Balancing Service Charge BS-1 J Total Delivery Charge BGSS: (Applicable To Sales Customers Only) A

161 SMG-13 Page 23 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 9 ELECTRIC GENERATION SERVICE (EGS) - COMMERCIAL/INDUSTRIAL RIDER RATE PUA NJ SALES TAX TARIFF RATE CUSTOMER CHARGE D-1 DEMAND (MCF) DELIVERY CHARGE (per therm): Base Rate - Winter Season (Nov - Mar) Base Rate - Summer Season (Apr - Oct) SBC: RAC E, G CLEP E, K USF E Total SBC EET N Balancing Service Charge BS-1 J Total Delivery Charge - Winter Season Total Delivery Charge - Summer Season BGSS: (Applicable To Sales Customers Only) A RATE SET MONTHLY

162 SMG-13 Page 24 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 10 ELECTRIC GENERATION SERVICE-LV (EGS-LV) RIDER RATE PUA NJ SALES TAX TARIFF RATE FIRM CUSTOMER CHARGE D-1 DEMAND (MCF) (Rate is negotiated. Shown here is the benchmark rate.) D-2 DEMAND BGSS (MCF) (Applicable to Sales Customers Only) A DELIVERY CHARGE (per therm): SBC: RAC E, G CLEP E, K USF E EET N Total Delivery Charge Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) I Balancing Service Charge CASH OUT CHARGE (CREDIT) (Applicable to Firm Transportatin Customers Only) I RATE SET MONTHLY BGSS: (Applicable To Sales Customers Only) A RATE SET MONTHLY LIMITED FIRM D-2 DEMAND BGSS(MCF) (Applicable to Sales Customers Only) A DELIVERY CHARGE (per therm): SBC: RAC E, K CLEP E, G USF E EET N Total Delivery Charge C-3 (Rate is negotiated. Shown here is the benchmark rate.) Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) I Balancing Service Charge CASH OUT CHARGE (CREDIT) (Applicable to Firm Transportatin Customers Only) I RATE SET MONTHLY BGSS: (Applicable To Sales Customers Only) A RATE SET MONTHLY

163 SMG-13 Page 25 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 11 YARD LIGHTING SERVICE (YLS) RIDER RATE PUA NJ SALES TAX TARIFF RATE MONTHLY CHARGE / INSTALL STREET LIGHTING SERVICE (SLS) MONTHLY CHARGE / INSTALL INTERRUPTIBLE GAS SALES (IGS) Commodity Rate Set Monthly SBC: RAC E, K USF E Total SBC: EET N

164 SMG-13 Page 26 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 12 INTERRUPTIBLE TRANSPORTATION (ITS) RIDER RATE PUA NJ SALES TAX TARIFF RATE CUSTOMER CHARGE TRANSPORTATION CHARGE A SBC: RAC E, K CLEP E, G USF E Total SBC: EET N TRANSPORTATION CHARGE B SBC: RAC E, K CLEP E, G USF E Total SBC: EET N TRANSPORTATION CHARGE C SBC: RAC E, K CLEP E, G USF E Total SBC: EET N

165 SMG-13 Page 27 of 28 SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 13 NATURAL GAS VEHICLE (NGV) RATE PUA NJ SALES TAX TARIFF RATE COMPANY OPERATED FUELING STATIONS DELIVERY CHARGE (per therm): SBC RAC E, K CLEP E, G USF E Total SBC: EET N Total Delivery Charge DISTRIBUTION CHARGE COMPRESSION CHARGE Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) (Applicable for Transportation Customers Only) I Balancing Service Charge BS-1 J BGSS: (Applicable To Sales Customers Only) A RATE SET MONTHLY CUSTOMER OPERATED FUELING STATIONS CUSTOMER CHARGE CF/hour ,000-4,999 CF/hour ,000-24,999 CF/hour ,000 or Greater CF/hour DELIVERY CHARGE (per therm): SBC RAC E, K CLEP E, G USF E Total SBC: EET N Total Delivery Charge DISTRIBUTION CHARGE Balancing Service Charge BS-1 I Balancing Service Charge BS-1 (Opt Out Provision) (Applicable for Transportation Customers Only) I Balancing Service Charge BS-1 J BGSS: (Applicable To Sales Customers Only) A RATE SET MONTHLY Facilities Charge (Applicable only to Customers that elect the Company construct Compressed Natural Gas ("CNG") fueling Facilities located on Customer's property)

166 Heat Residential Rate Schedule: SOUTH JERSEY GAS COMPANY Schedule of Rate Components Appendix A - Effective Page 14 SMG-13 Page 28 of 28 RSG FSS RSG-FTS Difference BGSS Base Rate CLEP RAC CIP USF TIC EET BSC "J" BS Price to Compare NonHeat Residential Rate Schedule: RSG FSS RSG-FTS Difference BGSS CIP ( ) ( ) Base Rate CLEP RAC USF TIC EET BSC "J" BS Price to Compare GSG (Under 5,000 therms annually) GSG FSS GSG-FTS Difference BGSS CIP Base Rates CLEP RAC USF TIC EET BSC "J" BS Price to Compare GSG (5,000 therms annually or greater) GSG FSS GSG-FTS Difference BGSS CIP Base Rates CLEP RAC USF TIC EET BSC "J" BS Price to Compare GSG-LV Prior to 7/15/97 GSG-LV FSS GSG-LV-FTS Difference BGSS CIP ( ) ( ) Base Rates CLEP RAC USF TIC EET BSC "J" BS Price to Compare

167 EXHIBIT E STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF SOUTH JERSEY GAS COMPANY TO CONTINUE ITS ENERGY EFFICIENCY PROGRAMS ( EEP IV ) AND ENERGY EFFICIENCY TRACKER PURSUANT TO N.J.S.A. 48: ( SJG EEP IV Program ) DOCKET: DIRECT TESTIMONY OF ISAAC GABEL-FRANK ON BEHALF OF SOUTH JERSEY GAS COMPANY March 2018

168 EXHIBIT E TABLE OF CONTENTS I. INTRODUCTION... 1 II. PURPOSE OF THIS TESTIMONY... 3 III. SUMMARY OF CONCLUSIONS... 8 IV. COST-BENEFIT ANALYSIS ASSUMPTIONS... 9 V. COST-BENEFIT ANALYSIS RESULTS VI. CONCLUSIONS... 22

169 EXHIBIT E I. INTRODUCTION Q. Please state your name and business address. A. My name is Isaac Gabel-Frank and my business address is 417 Denison Street, Highland Park, New Jersey, I am presently employed as a Vice President at Gabel Associates, Inc., an energy, environmental, and public utility consulting firm. Q. Please summarize your professional experience and educational background. A. As a Vice President at Gabel Associates, Inc., I perform specialized economic, financial, tariff, regulatory, and marketplace analysis for various energy projects including energy efficiency, renewable energy, cogeneration, and traditional generation sources. This comprehensive analysis takes into account all critical cost/benefit factors and is designed to quantify the economic outcome of customized projects to support investment decisions. Through this work, I also monitor the electricity, natural gas, and renewable markets and offer tailored insights in that regard. Since beginning work at Gabel Associates, Inc. in 2009, I have evaluated a myriad of projects for both public and private clients and assisted in the analysis, development, and implementation for all types of technologies and contractual arrangements. This includes the development of proprietary models that evaluate the viability of projects, as well as long-term forecasts based on market signals and industry knowledge. I use my knowledge of wholesale electricity and natural gas markets, paired with my experience working with retail tariffs to deliver in-depth market forecasts which are used to assess and undertake project investment decisions. I am also versed on regional transmission organizations (RTOs) including the offering of energy efficiency, demand response, renewable, and traditional generation resources into the PJM market, and was a lead contributor in the development of a proprietary statistical model that computes the risk exposure of capacity resources within the PJM and ISO-New England footprints. I received a BA in Economics, Political Science, and English Writing from the University of Pittsburgh

170 EXHIBIT E Further work experience is detailed in my resume provided in the attached Schedule IGF- 1. Q. What experience do you have in conducting cost benefit analyses (CBAs) for energy efficiency programs? A. In 2017, I prepared the Public Service Electric & Gas Company (PSE&G) CBA using the five tests referenced in the New Jersey Board of Public Utilities ( BPU or Board ) Minimum Filing Requirements (MFRs), in support of PSE&G s 2017 Energy Efficiency Program filing, and provided expert testimony presenting the CBAs. I have also completed numerous CBAs for Federal agencies across the United States, as a well as a multitude of counties, municipalities, and school districts within the State of New Jersey. I am also currently preparing CBAs for other utilities in New Jersey to support upcoming energy efficiency filings. The projects I have analyzed range in type and size and represent an array of different technologies and configurations. Having performed this analysis for projects with varying degrees of complexity, I am extremely familiar with the process and methodology to formulate an objective and balanced cost-benefit study. Q. Did you prepare the CBA supporting the petition of South Jersey Gas Company (SJG or the Company) for continuation of the Company s programs? A. Yes. I prepared the CBA detailing the results of the five tests prescribed in the BPU MFRs. This analysis included developing a model that analyzed measure-specific details and computing the estimated costs and savings of each program for use in the Total Resource Cost (TRC) test, the Participant Cost test (PCT), the Program Administrator Cost (PAC) test, the Ratepayer Impact Measure (RIM) test, and the Societal Cost test (SCT)

171 EXHIBIT E II. PURPOSE OF TESTIMONY Q. Please describe the purpose of your testimony. A. The purpose of my testimony is to present the methodology and results of the five CBA tests including the TRC, PCT, PAC, RIM and SCT tests, to satisfy SJG s EEP IV MFRs. Q. Please describe the five CBA tests required by the Board s MFRs. A. On October 20, 2018 the Board approved in Docket No. QO a new set of MFRs to supersede those put in place in May of As set forth in the updated MFRs, Section V.b. states that: The utility shall calculate a cost/benefit analysis using the Participant Cost Test, Program Administrator Cost Test, Ratepayer Impact Measure Test, Total Resource Cost Test, and Societal Cost Test that assesses all program costs and benefits from a societal perspective i.e., that includes the combined financial costs and benefits realized by the utility and the customer. The utility may also provide any cost benefit analysis that it believes appropriate with supporting rationales and documentation. Each test listed above is designed to provide a different perspective on the costeffectiveness of the proposed programs. According to the California Standard Practice Manual 1, the five tests can be understood to illustrate the following: Societal Cost Test The SCT measures the net costs of a program as a resource option based on the total costs of the program, including both the participants' and the utility's costs. The SCT differs from the TRC test in that it includes the effects of societal impacts such as environmental impacts to the economy, excludes tax credit benefits, and uses a different (societal) discount rate. 1 cpuc.ca.gov/uploadedfiles/cpuc_public_website/content/utilities_and_industries/energy_- _Electricity_and_Natural_Gas/CPUC_STANDARD_PRACTICE_MANUAL.pdf - 3 -

172 EXHIBIT E Total Resource Cost Test The TRC test measures the net costs of a program as a resource option based on the total costs, including both the participant and the utility costs of the program. Participant Cost Test The PCT is the measure of the quantifiable benefits and costs from the perspective of program participants. Since many customers do not base their decision to participate in a program entirely on quantifiable variables, this test is not a complete measure of the benefits and costs of a program to a customer. Program Administrator Cost Test The PAC test measures the net costs of a program as a resource option based on the costs incurred by the program administrator or utility (including incentive costs) and excluding any net costs incurred by the participant. The benefits are similar to the TRC benefits. Costs are defined more narrowly. This test measures the net economic impact of investing in energy efficiency programs from the perspective of the utility. Ratepayer Impact Measure Test The RIM test measures what happens to customer rates due to changes in utility revenues and operating costs caused by the program. Rates will go down if the change in revenues from the program is greater than the change in utility costs. Conversely, rates or bills will go up if revenues collected after program implementation are less than the total costs incurred by the utility in implementing the program. The RIM test indicates the direction and magnitude of the expected change in customer bills or rate levels. In essence, the RIM test reviews the benefits of energy efficiency programs against the cost to all ratepayers, not just participants. In aggregate, these tests provide the Board with multiple viewpoints of the benefits and costs associated with the programs

173 EXHIBIT E Q. Of these five tests, which in your opinion best measures the cost-effectiveness of an energy efficiency program? A. The SCT is the best test to evaluate energy efficiency programs because it provides the most complete picture of the costs and benefits of the energy efficiency programs. The other tests, while useful for other information, are incomplete in comparison with the SCT. For example, the SCT is the only test that recognizes carbon reduction and other environmental benefits, and therefore is the only means to consider the potential cost of climate change and the positive impact on the environment of proposed programs, and their alignment with the State s environmental and energy policy goals. The full range of benefits used in the SCT are also statutorily required for evaluating offshore wind projects under New Jersey s Offshore Wind Economic Development Act (OWEDA). Offshore wind projects also require the Board to consider CBAs. It is equitably unfair and discriminatory to consider societal benefits for offshore wind and not consider the same for energy efficiency programs. A thorough accounting of all benefits related to the energy efficiency programs, inclusive of environmental benefits and other important society-wide impacts such as emission reductions, economic and employment benefits, enhanced ability for low income bill payment and reduced health costs, among other benefits, can only be accomplished through use of the SCT, a critical test evaluating cost-effectiveness. Q. Did you evaluate all the EEP IV programs proposed using the five CBA tests identified in the MFRs? A. No. Pursuant to MFR Section I.e., the utility is permitted to exempt certain programs from the CBA if compliance with Part V of these requirements would not be feasible. Based on this, the Emerging Technologies and Approaches (ETA) and Education programs are exempt from CBA analysis. For those programs that are not exempt and are subject to the CBA requirement, I provided results for all five tests

174 EXHIBIT E Q. Why are the Emerging Technologies and Approaches and Education programs exempt from the CBA requirements? A. The ETA and Education programs are exempt because both programs meet the express exemption detailed in MFR Section I.e. Specifically, the ETA program is geared towards evaluating novel and innovative technologies and approaches to energy savings that have yet to achieve commercial or mainstream operation. The ETA program includes research, field test technologies, and approaches to develop reliable measurable savings estimates to support future deployment. SJG will work with fellow utilities to share insights and information to achieve best practices and improve testing methods and reduce costs. It is anticipated that the ETA program will help to shape the future of energy efficiency in the State, and that some of the initiatives and technologies evaluated in this program may result in full scale program offerings in the future that would be subject to CBA analysis based upon the findings of this program. Because this program introduces novel ideas where documentation supporting estimated costs/benefits may not be easily produced, it should be exempt from the requirements of the CBA. Similarly, the Education program is designed to promote energy efficiency at schools and homes through targeted curriculum and educational sessions. While it is anticipated that this program will generate savings, there is a lack of verifiable evidence in New Jersey to support a CBA. The implementation of the Education program will include information gathering, baseline calculations, and tracking of savings to support future energy savings calculations. Because this program has an educational rather than equipment-based focus, it too should be exempt from the requirements of the CBA. Q. Did you evaluate the SJG programs that provide loans supporting NJCEP administered programs using the five CBA tests provided in the MFRs? Yes, for programs that provide complementary service to the already existing NJCEP administered programs, i.e., those where SJG will provide loans (and for select programs, rebates) to NJCEP program participants, I completed the five CBA tests. These specific - 6 -

175 EXHIBIT E programs were evaluated jointly with other programs administered by SJG in order to prevent an unbalanced view of the cost-effectiveness of the SJG programs. However, I utilized a different approach in evaluating the NJCEP programs than the other SJG programs. Since these programs are providing loans (and for select programs, rebates) and are complementary to a program offered by another funding entity (the NJ Office of Clean Energy), the measurement of costs and benefits is unlike that of usual programs and does not fit squarely into the five CBA test methods. Accordingly, this presents a novel issue and there are a range of approaches that could be used. Q. Please explain how you evaluated the NJCEP programs differently than the other SJG programs? A. For the NJCEP Loan programs, I estimated the cost-effectiveness of these programs using the cost of the financing, total number of participants expected to take financing, and the incremental costs and benefits for each program. I did not include the additional costs borne by NJCEP to deliver the program or the NJCEP rebate cost. SJG has survey results that I utilized to determine the benefits from their loan offer. For benefits, I assumed only the benefits associated with the incremental participation assumed to result from the financing, rebates, marketing, and support provided by SJG for these programs. The incremental participation was sourced from participant feedback survey data provided in the Applied Public Policy Research Institute for Study and Evaluation (APPRISE) South Jersey Gas 2016 Energy Efficiency Program Evaluation, which stated that 82% of participants would not have moved forward with all energy efficiency improvements if the SJG 0% loan was not available. Therefore, for these programs, only 82% of benefits were included in the CBA. For costs, I included the internal SJG financing costs, assumed to be SJG s Weighted Average Cost of Capital (WACC) on the outstanding loan amounts, as well as the incremental cost of the programs associated with the incremental value provided by SJG. The financing costs, or the lost opportunity cost of the dollars loaned to SJG customers, represents the value SJG incurs to provide loans to customers. The incremental costs, i.e., - 7 -

176 EXHIBIT E the difference between the base and efficient measure costs, were sourced from NJCEP FY2018 program filing data discounted by 82% to represent only those costs incurred by incremental participation. While not a traditional approach to evaluating the cost effectiveness of these programs, this approach is warranted because these are not traditional programs. By providing no or lowcost financing, SJG increases participation in the NJCEP programs. However, as NJCEP has already evaluated the cost effectiveness of these programs, all other associated costs are not considered incremental to this program and were not included. III. SUMMARY OF CONCLUSIONS Q. Please summarize your conclusions. A. Based on a calculation of costs and benefits (as detailed in this testimony), I derived the benefit-cost ratio of each of the five tests for each of the sectors proposed in SJG s EEP IV program filing. Accordingly, the SJG s EEP IV portfolio level SCT ratio is 3.2. Over the life of the energy efficiency measures, the SJG EEP IV programs will yield total societal benefits (NPV) of $435 million as compared to total societal costs of $134 million, resulting in net benefits of $301 million. The detailed results of the CBA are provided below as well as in Schedule IGF-2. The results from the other tests, in summary, indicate that: Nearly all programs are cost effective from a TRC perspective; All programs are cost effective from a PCT perspective; Nearly all programs are cost effective from a PAC perspective; and The programs show appropriate impact from a RIM perspective. Q. What do you conclude from these results? A. I conclude that each of the proposed programs, as well as the total portfolio, are cost effective under the SCT, the most comprehensive measure of cost-effectiveness. In - 8 -

177 EXHIBIT E addition, the results of the remaining tests also show the programs are cost-effective and provide significant benefits to ratepayers and the State. IV. COST-BENEFIT ANALYSIS ASSUMPTIONS Q. What types of CBAs did you prepare? A. As previously stated, my analysis included the following five CBA tests: 1) Societal Cost Test (SCT); 2) Total Resource Cost (TRC) Test; 3) Participant Cost Test (PCT); 4) Program Administrator Cost (PAC) Test; and 5) Ratepayer Impact Measure (RIM) Test. Q. What methodology did you use to undertake these calculations? A. Consistent with previously approved energy efficiency filings at the Board, I utilized the methods in the California Standard Practice Manual, which has been used throughout the country for over 30 years as a basis for the calculation of cost-effectiveness through the five prescribed CBA tests discussed above. I also utilized the National Standard Practice Manual developed by the National Efficiency Screening Project 2 to support the measurement of cost-effectiveness. Within the CBA tests, there are a wide range of costs and benefits used to characterize program integrity, some of which are applicable in conducting certain tests but not others. Table 1 shows a list of specific costs and benefits and the tests they apply to: 2 nationalefficiencyscreening.org/wp-content/uploads/2017/05/nspm_may-2017_final.pdf

178 EXHIBIT E Table 1: Costs and Benefits Utilized in CBA Tests SCT TRC PCT PAC RIM Program Benefits Lifetime Avoided Wholesale Electric Energy Costs x x x x Lifetime Avoided Wholesale Electric Capacity Costs x x x x Lifetime Avoided Wholesale Natural Gas Costs x x x x Lifetime DRIPE Benefits (E&G) x x x x Lifetime Avoided RPS REC Purchase Costs x x x x Lifetime Avoided Wholesale Volatility Costs (E&G) x x x x Lifetime Avoided T&D Costs (E&G) x x x x Lifetime Avoided Retail Electric Costs Lifetime Avoided Retail Natural Gas Costs Lifetime Program Investment Costs Lifetime Avoided Distribution Costs (utility lost revenue) Lifetime Avoided Emissions Costs Lifetime Job and Savings Multiplier Benefits Program Costs Lifetime Incremental Costs x x Lifetime Participant Costs Lifetime Administration Costs x x x x Lifetime Program Investment Costs x x Lifetime Reallocated Distribution Costs (utility lost revenue) Q. Please briefly describe the Program Benefits listed in Table 1. A. To conduct the CBA, I reviewed and analyzed thirteen (13) types of benefits which were incorporated across the five prescribed cost benefit tests. These benefits include: x x x x x x x x Lifetime Avoided Wholesale Natural Gas Costs The Lifetime Avoided Wholesale Natural Gas Costs benefit captures wholesale natural gas market purchases that would be avoided as a result of reduction in energy usage associated with SJG s EEP IV programs The value of avoided costs is computed based on the market cost of natural gas delivered to Transcontinental Pipeline (Transco) Z6Non-NY North delivery point. Underlying supply prices were escalated based upon EIA Annual Energy Outlook Henry Hub reference case. The underlying Henry Hub supply forecast was combined with the Transco Z6Non

179 EXHIBIT E NY North basis to determine the avoided cost projection. All values were adjusted to account for average losses and sales and use tax. Lifetime Avoided Wholesale Electric Energy Costs The Lifetime Avoided Wholesale Electric Energy Costs benefit captures wholesale electric market purchases that would be avoided as a result of reductions in energy usage associated with SJG s Programs. The value of avoided costs is estimated using PJM Western Hub forward prices, adjusted for congestion to reconcile for topographical Locational Marginal Pricing (LMP) differences between Western Hub and the Atlantic City Electric (ACE) zone (the electric delivery territory in which a majority of SJG customers receive electric service). Prices were forecasted based upon Energy Information Administration (EIA) Annual Energy Outlook reference case for the Reliability First Corporation East region electricity generation escalations. All values were adjusted to account for marginal line losses on the ACE and PJM systems, and sales and use tax. Lifetime Avoided Wholesale Electric Capacity Costs The Lifetime Avoided Wholesale Electric Capacity Costs benefits captures the wholesale reduction in PJM capacity as a result of the reductions in electric demand associated with SJG s Programs. I used actual cleared PJM Eastern Mid-Atlantic Area Council (EMAAC) Locational Deliverability Area (LDA) prices where available. Clearing prices were escalated by three (3) percent thereafter. All values were adjusted to account for marginal line losses on the ACE and PJM systems, PJM s Forecast Pool Requirement (FPR) to account for avoided reserve requirements, and sales and use tax. Lifetime Demand Reduction Induced Price Effect Benefits (Electric & Gas) The Lifetime Demand Reduction Induced Price Effects (DRIPE) price suppression (also known as merit order benefits) benefit captures the reduction in wholesale electric and

180 EXHIBIT E natural gas market prices for all customers, not just participants, as a result of energy efficiency. Wholesale electric and natural gas markets are fundamentally supply and demand based. Therefore, downward movement in the electric or natural gas demand curve as a result of reduced consumption should result in less expensive generation resources being dispatched for electricity, and less expensive natural gas delivered. Both markets clear at a lower price, and the associated reductions in market prices flow through to all customers. The value of electric DRIPE price suppression was computed by undertaking a North American power market simulation using AURORAxmp (AURORA), focusing on the Eastern Interconnect and in particular, the PJM interconnect. To determine the incremental change in electricity prices using AURORA, the model conduced two separate market simulations: 1) a Base Case, using current fuel prices, and business-as-usual market assumptions; and 2) a SJG Energy Efficiency Case, in which total energy and peak demand were reduced to reflect SJG s proposed Energy Efficiency Program. Each of these simulations produced long-term price forecast for the ACE zone. The comparison of the two different price forecasts results in the market price impact (merit order effect or DRIPE). Natural gas DRIPE price suppression occurs as a result of reduced demand in the natural gas markets servicing New Jersey. Highly congested natural gas markets, those in New Jersey that trade around the Transco Z6 Non-NY North delivery point are candidates for DRIPE price suppression effects as a result of energy efficiency. In these highly liquid and traded markets, even a small reduction in the bid-ask price spread can have significant effects on the cost of natural gas. While a value for natural gas DRIPE price suppression was not included in this analysis, it merits further research and could be included at a later date as it represents a tangible benefit to all ratepayers

181 EXHIBIT E Lifetime Avoided RPS REC Purchase Costs The Lifetime Avoided Renewable Portfolio Standard (RPS) Renewable Energy Certificate (REC) Purchase Costs benefit estimates the reduced volume of RECs that must be purchased by New Jersey s electric retail suppliers as a result of SJG s EEP IV programs. The New Jersey RPS sets the total volume requirement of RECs that must be purchased as a percent of retail load. A reduction in retail load due to energy efficiency will reduce the total number of RECs required to be purchased. Market prices for New Jersey Class I RECs, Class II RECs and SRECs were used based on an internal supply-demand analysis and compliance costs for the three New Jersey REC markets. Lifetime Avoided Wholesale Volatility Costs (Electric & Gas) The Lifetime Avoided Wholesale Volatility Costs benefit estimates the value of avoiding risk of wholesale purchases. Wholesale electric and natural gas prices are inherently risky as they are market-based and not fixed in price or volume. Large fluctuations in prices expose customers and retail suppliers to risks that ultimately are priced into retail rates. Energy efficient measures and practices amount to a purchase of energy service which does not contain the price volatility implicit in the price of electricity and natural gas. By reducing the overall energy purchases of customers, customers are exposed to less fuel volatility. In this regard, energy efficiency can be viewed as an energy resource that does not contain the price volatility embedded in purchases from the electric and gas supply systems. The risk avoidance benefit of energy efficiency was applied as a price adder to the cost of electricity and natural gas. The price adder was determined based upon a review of studies and regulatory decisions. While there is some variation among the studies, a conservative premium based on these precedents of 10% of electric and natural gas costs was assumed

182 EXHIBIT E Lifetime Avoided Transmission and Distribution (T&D) Costs (Electric & Gas) The Lifetime Avoided T&D Costs benefit estimates the value of reducing the cost of building new and maintaining existing transmission and distribution infrastructure as a result of reduced or flattened load. Avoided electric T&D costs were calculated based upon the precedent set in previous filings, sourced from the Draft Energy Efficiency Cost-Benefit Analysis Avoided Cost Assumptions produced by the Center for Energy, Economic and Environmental Policy (CEEP) of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, which has been used previously in a BPU proceeding and was not contested by any party. This estimate is conservative based on other recent data presented by the American Council for an Energy-Efficient Economy, which presented a range of $0 to $200 per kw with most values exceeding $50/kW. 3 Avoided natural gas T&D value results from a reduction in natural gas throughput, which has the potential to avoid incremental investment in transportation and delivery infrastructure, as well as potentially reduce maintenance and other related costs on a system experiencing less throughput. While avoided natural gas T&D value was not included in this analysis, it merits further research and could be included at a later time as it represents a real benefit to all ratepayers. Lifetime Avoided Retail Electric and Natural Gas Costs The Lifetime Avoided Retail Electric and Natural Gas Costs benefit captures the actual bill savings to participants of the programs. A key benefit of energy efficiency is reduced consumption by participants, which in turn, results in reduced utility costs. Avoided retail electric costs were calculated based on the electric charges and applicable rate classes in ACE s Tariff for Electric Service. This method results in a price to 3 See Everyone Benefits: Practices and Recommendations for Utility System Benefits of Energy Efficiency at aceee.org/sites/default/files/publications/researchreports/u1505.pdf

183 EXHIBIT E compare analysis, as only portions of the tariff which would be offset as a result of the programs are included in the analysis. By way of example, customers will not offset any of the monthly fixed Service Charge. Therefore, the avoidance of that charge was not included in the retail electric savings analysis. Each charge was escalated, by component, to account for separate escalation rates for distribution and supply charges. Charges related to electric delivery and transmission were escalated at 2.0% per year and electric energy and capacity supply charges were escalated in a manner consistent with the wholesale market escalations explained above. Avoided retail natural gas costs were calculated based on the natural gas charges and applicable rate classes available in SJG s Tariff for Gas Service. This method results in a price to compare type analysis, as only portions of the tariff which would be offset as a result of the programs are included in the analysis. By way of example, customers will not offset any of the monthly fixed Service Charge. Therefore, the avoidance of that charge was not included in the retail natural gas savings analysis. Each charge was escalated, by component, to account for separate escalation rates for distribution and supply charges. Charges related to natural gas delivery were escalated at 2.0% per year while natural gas supply charges were escalated in a manner consistent with the wholesale market escalations explained above. Lifetime Program Investment Costs The Lifetime Program Investment Costs benefit captures the direct rebate incentives provided to participants of the programs. Depending on perspective, lifetime program investment costs can either be a benefit to a program (to participants) or a cost to programs (to the utility and ultimately, ratepayers). This benefit is only realized in the PCT, as that test singles out the experience of a participant in the programs. For the NJCEP Loan programs, the lifetime program investment cost represents the present value of any rebates provided in support of NJCEP Loans

184 EXHIBIT E Lifetime Avoided Distribution Costs (Utility Lost Gained) The Lifetime Avoided Distribution Costs benefit captures additional revenues collected by the utility which can be used to reduce distribution costs for all customers. The avoided distribution costs primarily occur when revenues from new or increased customer usage exceed the cost to service the new load. This cost is sometimes known as gained utility revenues. SJG s EEP IV filing does not include any programs resulting in avoided distribution costs. Lifetime Avoided Emissions Costs The Lifetime Avoided Emissions Costs benefit captures the value of reductions in CO2, NOx, and SO2. Neither mercury nor any other greenhouse gases were included in my analysis. The reduction in power plant emissions was forecasted using dispatch simulation results using AURORAxmp. Because AURORAxmp dispatches generation at the individual unit level, the simulation results provide marginal emissions rates for CO2, SO2, and NOx. Emissions rates associated with natural gas usage savings were based on the US Environmental Protection Agency (EPA) emissions factors for residential natural gas use. The emissions benefits were calculated using methods accepted by the State and EPA and other recognized national sources, including the Social Cost of Carbon for Regulatory Impact Analysis - Under Executive Order produced by the Interagency Working Group on Social Cost of Greenhouse Gases, United States Government, as well as the Cross-State Air Pollution Rule (CSAPR) EPA CBA. Lifetime Job and Savings Multiplier Benefits The Lifetime Job and Savings Multiplier Benefits were calculated using the Jobs and Economic Development Impact (JEDI) model, developed by the National Renewable Energy Laboratory (NREL). This model has been accepted by the BPU and captures direct, indirect, and induced job multiplier benefits. I also included a multiplier benefit to capture

185 EXHIBIT E the value of participant savings in the economy, as a portion of that savings would be spent and have a multiplied impact that would benefit the State overall. This value netted out any additional fixed costs reallocated to ratepayers. Q. Please describe the Program Costs listed in Table 1 above. A. I reviewed and analyzed five (5) categories of costs which were incorporated into the five prescribed cost benefit tests. These costs include: Lifetime Incremental Costs The Lifetime Incremental Costs capture the incremental costs of participating in the programs. These costs are calculated based on the difference between the efficient measure costs assumed to install energy efficiency technologies and processes and the base measure costs assumed that a participant would otherwise pay without access to the proposed program. Lifetime Participant Costs The Lifetime Participant Costs capture the incremental costs of participating in the programs paid by participants. These costs include both incremental costs paid by participants for the non-subsidized portion of energy efficiency costs as well as loan repayments for programs offering financing. Lifetime Administration Costs The Lifetime Administration Costs capture the costs of administering the proposed EEP IV program by SJG. These costs were developed by SJG, with my support, based on a Full Time Employee (FTE) equivalent and program year basis. While these costs are not direct customer incentives, the programs could not function without adequate administration and oversight. These costs also include marketing, contractor training, inspections and quality control, and evaluation

186 EXHIBIT E Lifetime Program Investment Costs The Lifetime Program Investment Costs capture the direct rebate incentives provided to participants of the programs. Rebate values were determined to maximize customer participation and minimize ratepayer impact. Loan incentives are captured in the lifetime participant cost as they are ultimately repaid by participants. For the NJCEP Loan programs, the Lifetime Program Investment Costs represent the present value of SJG s Cost of Capital on the outstanding loan amount for each program. This cost mirrors that provided as a benefit to participants in the PCT. Lifetime Reallocated Distribution Costs (Utility Revenue Lost) An associated cost is the Lifetime Reallocated Distribution Costs capture the value of any distribution costs avoided by participants that must be collected from the balance of ratepayers. SJG has an existing mechanism, the Conservation Incentive Program (CIP) that collects foregone distribution contributions from customers. These are not direct program costs and represent the transfer between existing ratepayer subsectors. This cost is sometimes known as lost utility costs or lost revenues. Reallocated distribution costs were calculated based on the individual rate charges which currently contribute to supporting distribution costs. In addition, the reallocated distribution costs also include tariff surcharges and riders that do not contribute to distribution costs but would likely be reallocated to ratepayers at large. Moreover, reallocated distribution costs do not include any supply related costs, as New Jersey s electric and natural gas utilities are deregulated, and avoided supply costs resulting from energy efficiency are not borne by ratepayers. Q. What assumptions did you use in estimating measure and program costs and energy savings? A. I relied on several different sources to estimate energy and demand savings from specific measures. My primary source was the most recently approved BPU Protocols. However, the BPU Protocols are limited to the programs offered by NJCEP. When the measurerelated calculations were unavailable in the protocols, I relied on several other sources

187 EXHIBIT E including the Mid-Atlantic TRM, the Massachusetts TRM, the New York TRM, historic SJG data, and NJCEP data to develop energy savings. When using out-of-state data sources, I adjusted weather and other variables to represent conditions in SJG s service territory. For costs, I relied on a variety of sources, including reports from the Northeast Energy Efficiency Partnerships, Department of Energy, previous evaluation studies, regionally specific technical resource manuals, web vendors for applicable measures, internal SJG cost estimates, and incremental cost data from the NJCEP. Incremental measure costs are difficult to estimate as they change on a near daily basis and vary regionally. With respect to free rider and free driver (spillover) effects, I assumed a net-to gross ratio of 1.0. This is consistent with the approach taken by TRC in NJCEP planning. In fact, the NJCEP Protocols report gross savings and generation only. Free riders and free drivers are not addressed in these Protocols. Further research in this area is planned. While some participants may have made similar investments absent the program (free riders), the programs also drive non-participants to invest in energy efficient products and change behavior (free drivers). I believe 1.0 is a reasonable estimate based on these factors. In addition, the lack of a formal net-to-gross evaluation in New Jersey makes it extremely difficult to ascertain this impact. Q. Were the costs and benefits evaluated on a nominal or present value basis? A. For the purposes of each of the CBA tests, all costs and benefits were evaluated on a present value basis. The TRC, PCT, PAC, and RIM tests used a discount rate to determine the present value of costs and benefits of 6.3%. This value was determined based on SJG s net of tax WACC approved in the Company s most recent base rate case in Docket No. GR The SCT was evaluated using a discount rate of 2.77%, equal to the yield of a 30-year U.S. Treasury bond

188 EXHIBIT E V. COST-BENEFIT ANALYSIS RESULTS Q. What were the results of the CBA for the proposed SJG EEP IV programs? A. Based on my analysis, every proposed program comfortably exceeded an SCT ratio of 1.0, with a minimum of 1.1 and a portfolio wide ratio of 3.2. Table 2 summarizes the SCT ratios of each program offered to customers in SJG s EEP IV program. Table 2: SJG EEP IV SCT Ratios Program SCT Total Portfolio 3.2 Residential Behavior 1.9 Residential Efficient Products 4.5 Residential Home Assessment with Direct Install 2.7 Residential Retrofit Weatherization 1.6 C&I Engineered Solutions 3.2 NJCEP Residential Loan/Rebate NJCEP - HPwES 1.1 NJCEP - HVAC 2.6 NJCEP Commercial Loans NJCEP - Direct Install 5.4 NJCEP - Smart Start NJCEP - P4P 15.7 Q. How did the proposed SJG EEP IV programs fare in TRC, PCT, PAC, and RIM tests? A. The SJG EEP IV programs proved cost-effective using the balance of the CBA tests prescribed in the MFRs, in addition to the SCT test, as described above. Table 3 illustrates the CBA ratios for each of the programs for the TRC, PCT, PAC, and RIM tests

189 EXHIBIT E 1 2 Table 3: SJG EEP IV TRC, PCT, PAC, & RIM Ratios Program TRC PCT PAC RIM Total Portfolio Residential Behavior 1.1 n/a Residential Efficient Products Residential Home Assessment with Direct Install Residential Retrofit Weatherization 0.5 n/a C&I Engineered Solutions NJCEP Residential Loan/Rebate NJCEP - HPwES NJCEP - HVAC NJCEP Commercial Loans NJCEP - Direct Install NJCEP - Smart Start NJCEP - P4P Q. Why did some programs score so highly in the PCT? A. As detailed above, the PCT is designed to ascertain cost-effectiveness for customers participating in programs. Many of the programs were designed to offer participants a number of low and no-cost measures and energy savings, and target markets that often have difficulty participating in energy efficiency programs. This includes programs such as the Residential Retrofit Weatherization program which targets residents earning between 225% to 400% of Federal Poverty Level, just above eligibility to participate in the Comfort Partners program, but still in an economic demographic with difficulty focusing on and investing in energy efficiency. Another program encompassed in the Residential Programs is the Residential Behavior program which provides Home Energy Reports (HERs) to participants. The HERs provide customers with insights and behavioral recommendations to improve the efficiency of their homes, all at no cost to the participants. Because

190 EXHIBIT E participants pay nothing for the HERs, the PCT for this particular program is infinite (any level of savings divided by zero costs is an incalculable infinite number). Combining this program with other programs which require participant payments results in aggregated results with high cost-effectiveness. VI. CONCLUSIONS Q. Can you briefly summarize the results of your analysis? A. The SJG EEP IV program portfolio is cost effective and will provide quantified net benefits to the customers of SJG. Total direct benefits to ratepayers (participants and nonparticipants) is estimated at $435 million while the associated costs are estimated at $134 million yielding net benefits of $301 million. In addition, participants direct retail bill savings are estimated at $320 million. Q. Based on these results, do you recommend approval of SJG s EEP IV program filing? A. Yes. The Board should approve SJG s application based on the substantial benefits to the State and to ratepayers, and the quantified positive results demonstrated by the cost benefit test. Q. Does this conclude your testimony? A. Yes. I further reserve the right to update my testimony should additional information become available. Thank you

191 Overview of Experience Isaac Gabel-Frank, Vice President at Gabel Associates, has over 8 years of experience supporting complex energy issues related to cost-benefit analysis, energy efficiency and renewables, energy project development, economic and tariff analysis, electric vehicles, regional transmission organizations (RTOs), and energy procurement. IGF-1 Isaac Gabel-Frank Vice President Professional Qualifications BA., Economics, Political Science, English Writing University of Pittsburgh, 2009 Mr. Gabel-Frank is an expert on cost-benefit analytics and has supported a multitude of clients in quantifying cost and benefit dynamics related to the economic impact of energy projects. This includes past and present work for Federal agencies, state and local governments, school districts, and private sector clients on energy efficiency, renewable energy, cogeneration, and traditional generation projects. Mr. Gabel-Frank also performs sensitivity analysis to help identify risk boundaries and market deviations. This analysis is critical to investment decisions as it allows clients to understand the full value proposition associated with energy initiatives. Mr. Gabel-Frank has submitted expert testimony to the New Jersey Board of Public Utilities (NJBPU) in matters regarding the cost effectiveness of energy efficiency. He is also currently supporting analytical and filing preparation activities for energy efficiency and renewable matters for a range of clients. Mr. Gabel-Frank has also performed in-depth project valuation and levelized cost of energy studies to support a proposed asset transaction. Mr. Gabel-Frank assists in the development of numerous renewable and energy efficiency projects including in-depth economic, technical, and utility tariff analysis, which incorporates long-term utility and energy forecasts. He has developed various tariff models from the ground up, which are customized to reflect the specific parameters of each project. He is also skilled at calculating energy savings associated with various project structures. As a result of his strong analytical skill set, Mr. Gabel-Frank has served an integral role on various progressive projects throughout the region. He supports solar projects through the request for proposal (RFP) process as well as reviews utility tariffs and performs cost/benefit analysis. He is also knowledgeable on the solar renewable energy certificate (SREC) market. He has specialized knowledge on demand response programs and can effectively support clients in evaluating this revenue opportunity. Mr. Gabel-Frank also developed a model that calculates energy savings and potential rebates associated with energy efficiency projects. In addition, he is extremely knowledgeable on RTO issues and actively monitors activities related to energy and capacity markets, energy efficiency, demand response, ancillary services, interconnection, and general grid issues. Mr. Gabel- Frank helps clients formulate and strategize positions on current PJM rules as well as provides analysis on potential market changes. This includes development of offer and bid strategies for energy efficiency, demand response, renewable, and traditional generation resources into the PJM market. He was a key contributor in the development of the Analytical Likelihood of Availability and Non-Performance Risk (ALAN) model, a proprietary stochastic modeling tool that computes the exposure of capacity resources within the PJM and ISO-NE footprints. ALAN uses resource outage data as well expected performance assessment event information to determine the probabilistic coincidence of outages and performance assessment events. Gabel Associates, Inc.