REGISTRAR'S NOTICE: The State Corporation Commission is claiming an exemption from the Administrative Process Act in accordance with § 2.2-4002 A 2 of the Code of Virginia, which exempts courts, any agency of the Supreme Court, and any agency that by the Constitution is expressly granted any of the powers of a court of record.

Title of Regulation: 20VAC5-318. Rules Governing the Evaluation, Measurement, and Verification of the Effects of Utility-Sponsored Demand-Side Management Programs (adding 20VAC5-318-10, 20VAC5-318-20, 20VAC5-318-30, 20VAC5-318-40, 20VAC5-318-50, 20VAC5-318-60).

Statutory Authority: §§ 12.1-13 and 56-585.1 of the Code of Virginia.

Effective Date: January 1, 2018.

Agency Contact: David Dalton, Utilities Analyst, Public Utility Regulation Division, State Corporation Commission, P.O. Box 1197, Richmond, VA 23218, telephone (804) 371-9634, FAX (804) 371-9350, or email david.dalton@scc.virginia.gov.

Summary:

The new chapter governs the evaluation, measurement, and verification (EM&V) of the effects of utility-sponsored demand-side management programs that are of general applicability to electric and natural gas utilities. Changes made since publication of the proposed chapter include adding definitions for the terms "average rate schedule usage," "eligible customer," and "free rider" and eliminating references to EM&V planning documents and certain provisions regarding those documents to clarify the scope of the preliminary EM&V plan filings. Various technical and other clarifying amendments are also set forth in the final regulations.

 

AT RICHMOND, NOVEMBER 9, 2017

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. PUR-2017-00047

Ex Parte: In the matter of Adopting
New Rules Governing the Evaluation,
Measurement, and Verification of the
Effects of Utility-Sponsored Demand-Side
Management Programs

ORDER ADOPTING RULES AND REGULATIONS

During the 2016 Session of the Virginia General Assembly, two identical bills, House Bill 1053 and Senate Bill 395, were passed by the General Assembly. These bills required the State Corporation Commission ("Commission") to evaluate the establishment of uniform protocols for measuring, verifying, validating, and reporting the impacts of energy efficiency measures implemented by investor-owned electric utilities providing retail electric utility service in the Commonwealth; a methodology for estimating annual kilowatt savings; and a formula to calculate the levelized cost of saved energy for such energy efficiency measures. The Commission also was required to submit to the Governor and the General Assembly a report of its findings and recommendations by December 1, 2016.

On March 30, 2016, the Commission issued a Scheduling Order in Case No. PUE-2016-00022 that established a proceeding to conduct an evaluation ("Evaluation") to consider the establishment of: (i) uniform protocols for measuring, verifying, validating, and reporting the impacts of energy efficiency measures; (ii) a methodology for estimating annual kilowatt savings for such energy efficiency measures; and (iii) a formula to calculate the levelized cost of saved energy for such energy efficiency measures (collectively, "Objectives").¹ The Commission conducted the Evaluation and considered the Objectives as they concern energy efficiency measures implemented by both investor-owned electric utilities and investor-owned natural gas utilities,² as both types of utilities conduct energy efficiency programs. The Commission determined that since evaluation and verification of energy savings of energy efficiency programs typically are measured against the projected savings included in cost/benefit analyses, the Commission also would consider the methodologies by which utilities calculate the components of the cost/benefit tests³ in proceedings requesting approval to implement energy efficiency programs.⁴

Among other things, the March 30, 2016 Scheduling Order invited interested persons and entities to comment on the Objectives and the Cost/Benefit Questions under consideration in this matter through the submission of written comments and/or through the presentation of oral comments at a public session. Over forty written and oral comments were received and considered by the Commission.

On November 30, 2016, the Commission issued an Order on Evaluation in Case No. PUE-2016-00022 wherein it, among other things, directed the Commission Staff ("Staff") to draft proposed rules governing the evaluation, measurement, and verification ("EM&V") of the effects of utility-sponsored demand-side management ("DSM") programs of general applicability to both electric and natural gas utilities.⁵ On December 1, 2016, the Commission submitted its report to the Governor and the Virginia General Assembly regarding the Evaluation.⁶

On May 16, 2017, the Commission issued an Order for Notice and Hearing ("Procedural Order") that docketed this proceeding. A draft of the proposed Rules Governing the Evaluation, Measurement, and Verification of the Effects of Utility-Sponsored Demand-Side Management Programs ("Proposed Rules") prepared by Staff were appended to the Procedural Order. The Procedural Order and Proposed Rules were published in the Virginia Register of Regulations on June 12, 2017, posted on the Commission's website, and sent to various interested parties. The Procedural Order also invited interested persons and entities to provide input through written and/or oral comments on the Proposed Rules and scheduled a public hearing to convene on September 8, 2017, for the receipt of oral comments on the Proposed Rules.

The following persons and entities submitted written comments: the Virginia Department of Mines, Minerals and Energy; Kentucky Utilities Company d/b/a Old Dominion Power Company; the Virginia, Maryland & Delaware Association of Electric Cooperatives ("Cooperatives"); Northern Virginia Electric Cooperative; Ameresco, Inc., Cree, Inc., the Dow Chemical Company, Schneider Electric, United Technologies Corporation, the National Association of Energy Service Companies, and the Polyisocyanurate Insulation Manufacturers Association; the Virginia Energy Efficiency Council ("VEEC"); Columbia Gas of Virginia, Inc. ("Columbia"); the Division of Consumer Counsel, Office of the Attorney General ("Consumer Counsel"); Appalachian Power Company ("APCo"); Virginia Natural Gas, Inc. ("VNG"); the American Council for an Energy-Efficient Economy and the Southeast Energy Efficiency Alliance; Virginia Electric and Power Company d/b/a Dominion Energy Virginia ("Dominion"); Advanced Energy Economy; EnergySavvy; the Southern Environmental Law Center ("SELC"); the Virginia Chapter of the Sierra Club; Viridiant; the Virginia Poverty Law Center ("VPLC"); the Virginia Housing Alliance; the Natural Resources Defense Council; and additional comments by individuals.

On August 11, 2017, Staff filed a report ("Staff Report") addressing comments submitted to the Commission concerning the Proposed Rules.  In response to comments received, Staff prepared revisions to the Proposed Rules, which were appended to the Staff Report. During the public hearing convened on September 8, 2017, the Commission received oral comments from the following persons and entities: APCo; Columbia; EnergySavvy; SELC; Dominion; VEEC; the Cooperatives; VPLC; Consumer Counsel; and the Staff.⁷

NOW THE COMMISSION, upon consideration of this matter, is of the opinion and finds that the Commission should adopt the rules appended hereto as Attachment A, effective January 1, 2018.

The Commission expresses appreciation to those who have submitted written and oral comments for our consideration. The Commission has considered all written and oral comments submitted in this proceeding.

The regulations we adopt herein contain modifications to those that were first proposed by Staff and published in the Virginia Register on June 12, 2017. These modifications follow our consideration of the comments filed in this proceeding, the additional proposed revisions contained in the Staff Report, other changes suggested by commenters at the hearing, and our analysis of the entire record in this proceeding. We will not comment on each rule in detail, but we highlight several of them below.

First, we agree with Staff's revisions to the Proposed Rules contained in the Staff Report and incorporate them into the rules that we adopt. Staff's proposed revisions respond to comments filed in this proceeding. As Staff noted, the revised Proposed Rules strengthen, and are generally consistent with and derivative of, current practice among Virginia utilities in reporting on the impacts of DSM Programs; therefore, the revised Proposed Rules should not impose significant additional burdens.⁸ These revisions, among other things, clarify that the Proposed Rules apply prospectively, i.e., to the implementation of new or renewing DSM programs. In addition, the revisions eliminate references to EM&V planning documents and clarify that preliminary EM&V plans should be filed at the time the utility seeks Commission approval of a program and that such EM&V plans should include an outline of how a utility intends to comply with 20 VAC 5-318-40 ("Rule 40"). Rule 40 is also retitled "Minimum Requirements for Collection of Evaluation, Measurement & Verification Data."⁹

Second, in its filed comments as well as at the hearing, Dominion recommended that Rule 40 D, as set forth in the revised Proposed Rules appended to the Staff Report, reference the United States Department of Energy's Uniform Methods Project ("UMP") rather than the International Performance Measurement and Verification Protocol ("IPMVP").¹⁰ While the Commission declines to adopt this recommendation at this time, Rule 40 D specifically provides that "alternative methodologies may be considered with sufficient supporting documentation and explanation of appropriateness." Thus, the Proposed Rules have sufficient flexibility for utilities to utilize the UMP, which the Commission notes was developed using the IPMVP,¹¹ with appropriate justification.

Third, Columbia and Dominion raised concerns during the hearing regarding the operation of 20 VAC 5-318-50 F ("Rule 50 F"), as revised in the Staff Report, and specifically questioned inclusion of the references to "the annual usage of the average rate schedule usage and eligible customer."¹² Columbia expressed concern about compliance with Rule 50 F because all customers within a rate schedule might not be capable of participating in a particular program in light of program requirements, and Columbia asserted that such information often would be impracticable to collect.¹³ Similarly, Dominion indicated that currently it does not track customer data such as building and equipment types by rate schedule and does not design programs based on rate schedules.¹⁴ The Commission appreciates these concerns and recognizes that unique programs may be dependent on individual customer makeup and that eligible customers may span more than one rate schedule. The Commission believes, however, that the rules as adopted contain sufficient flexibility to accommodate such a situation. In particular, Rule 50 F requires "a calculation of the expected savings as a percentage of the annual usage of the average rate schedule usage and eligible customer as appropriate and practicable."¹⁵ Thus, if appropriate and practicable, such a calculation should be included in the EM&V report and, if not, the utility should explain why such a calculation is not appropriate and practicable.¹⁶

Finally, Columbia raised the question of the relationship between the Proposed Rules and the ratemaking and energy efficiency report required by § 56-602 E of the Code of Virginia.¹⁷ To the extent the new rules create any duplication of reporting requirements, Staff is directed to work with the gas companies to synchronize the timing of reports to alleviate any associated additional regulatory burden.

Accordingly, IT IS ORDERED THAT:

(1) The Rules Governing the Evaluation, Measurement, and Verification of the Effects of Utility-Sponsored Demand-Side Management Programs, set out at 20 VAC 5-318-10 through 20 VAC 5-318-60, and which are attached hereto and made a part hereof, are hereby ADOPTED to be effective on January 1, 2018.

(2) The Commission's Division of Information Resources shall forward this Order Adopting Rules and Regulations and the rules and regulations adopted herein to the Registrar of Virginia for publication in the Virginia Register of Regulations.

(3) This Order and the attached adopted Rules shall be posted on the Commission's website: http://www.scc.virginia.gov/case.

(4) This matter is dismissed.

AN ATTESTED COPY hereof shall be sent by the Clerk of the Commission to all persons on the official Service List in this matter. The Service List is available from the Clerk of the State Corporation Commission, c/o Document Control Center, 1300 East Main Street, First Floor, Tyler Building, Richmond, Virginia 23219. A copy also shall be sent to the Commission's Office of General Counsel and Division of Public Utility Regulation.

____________________________________

¹ Commonwealth of Virginia, ex rel. State Corporation Commission, Ex Parte: In the matter of receiving input for evaluating the establishment of protocols, a methodology, and a formula to measure the impact of energy efficiency measures, Case No. PUE-2016-00022, Doc. Con. Cen. No. 160340071, Scheduling Order (Mar. 30, 2016).

² Though natural gas utilities were not specifically referred to by House Bill 1053 and Senate Bill 395, the Commission, in its discretion, included consideration of natural gas utilities' energy efficiency measures to provide for a more thorough Evaluation.

³ The cost/benefit tests include, at a minimum, the Participants Test, the Utility Cost Test, the Ratepayer Impact Measure Test, and the Total Resource Cost Test. See the Commission's Rules Governing Cost/Benefit Measures Required for Demand-Side Management Programs, 20 VAC 5-304-10 et seq.

⁴ In particular, the Commission determined the Evaluation would consider: (i) whether the application of costs and benefits is consistent across utilities; (ii) whether consistent application of costs and benefits across utilities is necessary or reasonable; and (iii) whether the application of the cost/benefit tests can be improved by enhanced evaluation and verification protocols for estimating savings actually realized (collectively, "Cost/Benefit Questions").

⁵ Commonwealth of Virginia, ex rel. State Corporation Commission, Ex Parte: In the matter of receiving input for evaluating the establishment of protocols, a methodology, and a formula to measure the impact of energy efficiency measures, Case No. PUE-2016-00022, Doc. Con. Cen. No. 161140091, Order on Evaluation (Nov. 30, 2016).

⁶ Commonwealth of Virginia, State Corporation Commission, Report to the Governor of the Commonwealth of Virginia and the Virginia General Assembly, "Report: Evaluation of the Establishment of Uniform Protocols for Measuring, Verifying, Validating, and Reporting the Impacts of Energy Efficiency Measures; a Methodology for Estimating Annual Kilowatt Savings; and a Formula to Calculate the Levelized Cost of Saved Energy for Energy Efficiency Measures Implemented by Investor-Owned Electric Utilities in the Commonwealth pursuant to Chapters 255 and 517 of the 2016 Acts of the Virginia General Assembly" (Dec. 1, 2016), available at: leg2.state.va.us/dls/h&sdocs.nsf/By+Year/HD122016/$file/HD12.pdf.

⁷ VNG was present at the public hearing and stated it had no further comments at this time. Tr. 52.

⁸ Staff Report at 4.

⁹ Staff's revisions also added additional appropriate definitions.

¹⁰ Dominion Comments at 9; Tr. 35-38. In the Proposed Rules, the IPMVP was referenced in Rule 40 G.  However, due to revisions Staff made in its Staff Report to the Proposed Rules, the IPMVP is now referenced in Rule 40 D.

¹¹ See Staff Report at 7.

¹² Tr. 24-27; 40-45.

¹³ Tr. 26.

¹⁴ Tr. 45.

¹⁵ Emphasis added.

¹⁶ The Commission also notes that Rule 60 provides for an opportunity for a utility to request a waiver of a rule for good cause shown.

¹⁷ Tr. 23.

CHAPTER 318

RULES GOVERNING THE EVALUATION, MEASUREMENT, AND VERIFICATION OF THE EFFECTS OF UTILITY-SPONSORED DEMAND-SIDE MANAGEMENT PROGRAMS

20VAC5-318-10. Purpose and applicability.

A. This chapter sets forth minimum requirements for Virginia's [ electric and natural gas ] utilities related to evaluating, measuring, and verifying the effects of utility-sponsored demand-side management (DSM) programs consisting of demand response and energy efficiency measures. This chapter should not be construed as limiting the ability of the commission or its staff to evaluate information in addition to or beyond that identified in this chapter or to use evaluation processes and procedures beyond those contained in this chapter.

B. [ This Effective January 1, 2018, this ] chapter shall apply to all [ electric and natural gas ] public utilities seeking commission approval [ of to implement or renew ] a DSM program [ and to all public utilities with DSM programs that have received prior commission approval or measure ].

20VAC5-318-20. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

[ "Average rate schedule usage" means an average calculated using all customers taking service under a rate schedule that are eligible to participate in a program or measure. ]

"Commission" means the Virginia State Corporation Commission.

"DSM" means demand-side management.

[ "Eligible customer" means a representative customer of the utility that is eligible by rate schedule or rate class to participate in a given program or measure and is capable of participating in that program or measure. ]

"EM&V" means evaluation, measurement, and verification.

"Emerging technologies" means technologies including automated measurement and verification software, advanced metering, building management systems, data analytics, and load monitoring systems.

[ "Free-ridership" means a program [ participate participant ] that would have implemented the program measure or practice in the absence of the program. ]

20VAC5-318-30. Administrative procedures for evaluation, measurement, and verification planning and reporting.

A. A utility filing for [ implementation of approval to implement ] new [ or continue existing ] DSM measures or programs shall file a [ preliminary ] plan for the EM&V of the proposed measures or programs as part of its application [ . Such plan shall comply with the standard requirements for planning filings contained in that outlines how a utility intends to comply with the requirements of ] 20VAC5-318-40.

B. A utility reporting the results [ of EM&V ] of DSM measures or programs [ subject to subsection A of this section ] shall comply with the standard requirements for EM&V reporting contained in 20VAC5-318-50.

20VAC5-318-40. [ Standard Minimum ] requirements for [ collection of ] evaluation, measurement, and verification [ planning filings data ].

A. In all filings required by 20VAC5-318-30, the [ source sources ] of all data or estimates used as inputs for proposed DSM measures or programs, in descending order of preference, shall be:

1. Utility-specific data [ if available and practical ];

2. Virginia-specific data if utility-specific data is unavailable or [ impractical impracticable ]. When Virginia-specific data is used, the utility shall provide an explanation as to why utility-specific data is unavailable or [ impractical impracticable ];

3. Data from non-Virginia jurisdictions or sources, if neither utility-specific data nor Virginia-specific data is available or [ practical practicable ];

a. When data from non-Virginia jurisdictions or sources is used, the utility shall provide an explanation as to why utility-specific data is unavailable or [ impractical impracticable ].

b. When data from non-Virginia jurisdictions or sources is used, the utility shall provide an explanation as to why Virginia-specific data is unavailable or [ impractical impracticable ] as well as the sources of all data, to include:

(1) Titles, version numbers, publication dates, and page numbers of all source documents, as appropriate; and

(2) An explanation as to why, in the utility's assessment, use of this data is appropriate.

B. EM&V [ planning documents reports ] shall include [ all relevant ] workpapers, support documents, assumptions, and equations used in developing the [ proposed measurement and verification methodologies of ] measures or programs [ reported ].

C. EM&V [ planning documents reports ] shall include measure-level estimates of kilowatt, kilowatt-hour, [ and ] dekatherm [ , and pipeline capacity ] savings as appropriate. An estimate that has been adjusted for free-ridership as well as an estimate that has not been adjusted for free-ridership should be included as appropriate.

 [ D. EM&V planning documents for proposed DSM measures or programs shall include an explanation of eligibility requirements for each rate schedule to which the measures or programs are being offered and estimates of participation by customers taking service under each eligible rate schedule as appropriate.

E. EM&V planning documents for proposed DSM measures or programs shall include a comparison of the estimated annual measure or program savings to the annual usage of an average customer in each rate schedule to which the measures or programs are being offered. This will include calculation of the expected savings as a percentage of the annual usage of the eligible average customer.

F. EM&V planning documents for DSM measures or programs shall include a description of the controls to be used by the utility to verify proper installation of the proposed measures and programs, as appropriate. Additionally, plans shall require the contractors and subcontractors that will be implementing the measures or programs to record details of serviced or replaced equipment, to include at a minimum:

1. Nameplate efficiency ratings; and

2. Serial numbers.

G. D. ] Generally, EM&V [ planning proposals of DSM programs or measures ] should comply [ , as appropriate, ] with Options A, B, C, or D from the International Performance Measurement and Verification Protocol [ (March 2002) (January 2012) ]. However, the commission recognizes that each utility has unique characteristics, and new or modified DSM measures are constantly being developed. As such, alternative methodologies may be considered with sufficient supporting documentation and explanation of appropriateness.

 [ H. E. ] Utilities are encouraged to consider use of emerging technologies, including "advanced measurement and verification" or "evaluation, measurement and verification 2.0" when appropriate and cost effective.

20VAC5-318-50. Standard requirements for evaluation, measurement, and verification reporting.

A. [ Utility reporting of the results of its EM&V of ] approved DSM measures or programs should be consistent with and contrasted to the [ preliminary ] EM&V plan set forth in the filings for approval of such measures or programs or as otherwise specified in a commission order approving such measures or programs. The commission recognizes that each utility has unique characteristics, and new or modified energy efficiency measures are constantly being developed. As such, alternative methodologies may be included in reporting provided that sufficient supporting documentation and explanation of appropriateness of alternative methodologies is provided.

B. EM&V reports [ concerning of ] existing measures or programs shall utilize utility-specific data [ or other data in conformance with 20VAC5-318-40 A ] when updating the analysis of the cost effectiveness of each measure, program, or portfolio [ to the most accurate extent possible as appropriate and practicable. EM&V reports of existing measures or programs shall include the information required by 20VAC5-318-40 B and C ].

C. Any changes to or variances from originally [ filed approved measure-level ] inputs and assumptions shall be documented and explained [ , and the impact of such changes on original cost/benefit estimates for DSM programs or measures shall be quantified ].

D. EM&V reports shall describe the methodologies by which the measured data was collected, including at a minimum:

1. The sampling plan; and

2. Statistical calculations upon which the reported data is based [ when applicable ].

E. EM&V reports for ongoing DSM measures or programs shall include an explanation of eligibility requirements for each rate schedule to which the measures or programs are being offered.

F. EM&V reports for ongoing DSM measures or programs shall include a comparison of the measured annual measure or program savings estimates to the annual usage of [ an the ] average [ rate schedule usage and eligible ] customer in each rate schedule to which the measures or programs is being offered. A comparison to originally [ submitted approved ] estimated savings for the measures or programs [ that were approved by the commission ] shall also be provided. This will include a calculation of the expected savings as a percentage of the annual usage of the [ average rate schedule usage and ] eligible [ average ] customer [ as appropriate and practicable ].

G. EM&V reports for ongoing DSM measures or programs shall include a description of the controls undertaken by the utility to verify proper installation of the measures or programs, as appropriate. Additionally, [ reports utilities ] shall [ include details provided by require the ] contractors [ or and ] subcontractors [ that will be implementing the measures or programs, if applicable and practicable, to record details ] of serviced or replaced equipment, to include at a minimum:

1. Nameplate efficiency ratings; [ and ]

2. Serial numbers [ .; and

3. Model numbers.

This information will be made available to commission staff upon request.

H. EM&V reports should include actual costs incurred by the utility and each EM&V contractor for (i) the development of the most recent EM&V plan and (ii) the administration of EM&V activities for the reporting period. ]

20VAC5-318-60. Waiver.

The commission may waive any or all parts of this chapter for good cause shown.