Introduction to cost-effectiveness

Insider has featured several recent articles referencing Energy Trust’s cost-effectiveness requirement, which helps determine when efficiency is the best energy buy for all utility customers. To help you understand and explain cost effectiveness to your customers when needed, Energy Trust created a new cost-effectiveness fact sheet resource.

What are cost-effectiveness tests?
Cost-effectiveness tests are commonly used by energy-efficiency programs to determine whether to invest in an energy resource that saves electricity or natural gas, and at Energy Trust, to indicate the amount of the cash incentive that may be provided to support a project. Energy Trust applies the Total Resource Cost Test benefit cost ratio and Utility Cost Test benefit cost ratio to ensure that customer funds are responsibly invested. The tests don’t evaluate the economics influencing a customer’s individual decision to invest in a project.

Why does Energy Trust make investments in cost-effective energy efficiency?
In Oregon, Energy Trust is required by legislation to invest in cost-effective energy efficiency. This means that for Energy Trust to provide an incentive for a project, the benefit must meet or outweigh the cost for all utility customers.

The Oregon Public Utility Commission has directed Energy Trust to apply two tests to assess the value of the energy-efficiency investment compared to a utility supplying the same amount of energy and determine whether energy efficiency is the best energy buy for all utility customers. Read more about these calculations here.

How does cost-effectiveness impact you?
The OPUC recently issued decisions about incentives that had been supported by Energy Trust through an OPUC exception to the cost-effectiveness requirement. This spring and summer, some Existing Homes incentives are changing based on these decisions. For more information, read the May article about insulation incentives extended through June 30, 2015, and the June article about upcoming incentive changes on July 1, 2015.

Refer to the new cost-effectiveness fact sheet resource to help you explain cost effectiveness to your customers.