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Third Party Programs
Typically I don’t focus on incentive programs as part of our advocacy efforts. Rebate program conversations can take up precious bandwidth with meager outcomes. This month I am taking exception and would like to discuss the radical new changes happening to rebates in the near future. First off I need to mention that California is well on the way to having a residential performance based rebate program. PG&E has a Pilot Pay-For-Performance (P4P) program in the works and we should see it roll out any day now. Paying rebates on measured performance is a fundamental change in how things are done. We will keep a close eye on this one. Perhaps a bit less obvious is the 60%, third party mandate the California Public Utilities Commission (CPUC) has handed down to the utilities. Here’s what they have said in a nutshell. Basically, the CPUC thinks that third parties, or outside vendors, can run energy efficiency incentive programs more effectively than the utilities. To encourage the utilities to get out of the program business the CPUC has mandated that 60% of new programs must be run by third parties.
Currently, the utilities do rely on third parties but only for about 20% of their programs. For many folks at the utilities, this is a welcomed idea. What really makes this a game changer is that it reshapes the way third parties participate in the process. Today the utilities design a program, build a budget, and then put out an RFP (request for proposal) to solicit a vendor to support their program. Moving forward the utilities will provide goals or objectives, such as saving a certain amount of kilowatts or therms, and the design and implementation will be proposed by the third parties. The utilities will review the various proposals and select the one they think is the best fit. The intent is to capitalize on the creative input from the 3rd parties and hopefully develop more effective programs at a lower cost. This is a huge change in the current process.
What does this mean to contractors? As I have mentioned previously, the current programs are not sustainable. This means the incentive programs will be changing. With this new mandate, I think we will see a variety of different approaches. Hopefully, they will be better than our options today. Overall I am optimistic about this approach. There is no question that the Utilities are not particularly fond of residential Whole House EE programs as they are complicated and expensive to run. Having some fresh ideas and testing new concepts will certainly be better than what we are working with today. The third parties will have a vested interest in seeing their program succeed. This means they will do all they can to help contractors with education and outreach to ensure they both succeed. The energy efficiency incentive landscape is changing, and perhaps due to this new process, we will find a solution that will drive the industry to market transformation. Only time will tell.