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June 30, 2025 — In this issue, NESP^TM brings you up to speed on key news: guidance on accounting for transfers in BCA, Michigan PSC staff reflections on the value of the OpenBCA Tool, state applications of the NSPM (highlighting Maryland and Virginia), and NSPM version 2 is in full swing. Lastly, if you missed the paper on state BCA practices for certain DER types, or where to find the Database of Screening Practices, we’ve got you covered. Please share with colleagues!

Julie Michals, Director

Josh Owens, Senior Associate

-New Paper: Accounting for Transfers in BCA

-Q&A with MI PSC Staff on OpenBCA Tool

-MD Unified BCA Phase 2, VA BCA, & more

-NSPM v2 Project Kicks Off

-DER BCA Practices in States

-Events

Benefit-cost analysis (BCA) is a valuable tool for helping jurisdictions determine the optimal amount of distributed energy resources (DERs) to implement. Some of the impacts included in a BCA test can be described as “offsetting transfers,” when one party incurs a cost that is equal to a benefit experienced by another party, and both parties are within the scope of the BCA test. Offsetting transfers—which are sometimes referred to as simply ‘transfer payments’—require special attention to ensure that costs and benefits are properly accounted for.

Tax incentives are a clear example where the benefits to the DER host customers are exactly equal to the costs to taxpayers. Should such transfers be considered both a benefit and a cost? Should they be excluded from the BCA altogether because they cancel each other out? Should they be treated only as a benefit, or only as a cost? The answers to these questions can depend on the perspective of the test being used, and they have important implications for BCA and the determination of which DERs are cost-effective.

Other examples of impacts addressed in the paper include utility performance incentives, incentives to host customers, and wholesale market price effects.

NESP is pleased to share a new paper, Identifying and Accounting for Transfers in Benefit-Cost Analysis of Distributed Energy Resources (June 2025). Authored by Synapse Energy Economics, which provides supplemental guidance to the NSPM, the paper focuses on the concept of transfers within BCAs. It explains how certain impacts from DERs may represent transfers, and why properly identifying and treating these transfers is essential for accurate and transparent BCA results. This paper offers practical tools to help regulators and analysts distinguish offsetting transfers from other impacts and account for them appropriately in BCAs. 

Over a dozen jurisdictions have applied the NSPM’s BCA framework or are using the NSPM to inform their cost-effectiveness analyses of DERs across North America. In 30+ other jurisdictions, the NSPM is recommended to support BCA for a range of DERs in various regulatory contexts. See below for details on what’s happening in Maryland and Virginia.

Maryland: Unified BCA Phase II Underway

A Phase II process to support implementation of the Maryland Public Service Commission (PSC) approved unified BCA (UBCA) and secondary tests is underway. This Phase II process – as announced in a recent PSC Notice – involves developing methodologies for accounting for the full range of UBCA impacts, as well as proposing guidance and processes for undertaking complementary analyses to BCA to inform the PSC’s decision framework for DER investments. 

NESP, with Energy Futures Group, Schiller Consulting, and Rábago Energy, are serving as the consultant team to provide technical assistance to, and facilitation of, the UBCA Workgroup. The team will also coordinate with the Commission’s other existing work groups where cost-effectiveness testing has been developed or is being considered. The Phase II process will include:

• Identifying appropriate methodologies for accounting for DER impacts (monetized or quantified assessments) to include in the UBCA – a priority for Phase II
• Providing guidance on conducting a distributional equity analysis alongside BCAs to inform how DER investments will impact priority populations (e.g., underserved populations)
• Developing guidance on how to conduct Maryland economic development analysis that accounts for net job creation, including direct and potentially indirect jobs.
• Addressing how to conduct rate and bill impact analysis alongside BCAs to understand impacts across customer classes/sectors, and rate design impacts customers with varying consumption rates and patterns.

Maryland’s Phase I and Phase II processes illustrate the key components of a comprehensive decision framework – as shown below – that regulators can use to guide decisions regarding resource investments. This framework, along with other state experiences, will help to inform NSPM v2 (see article "NSPM is Getting an Update" below).

Virginia: Assessing the Cost-Effectiveness of Energy Efficiency Programs 

The Virginia State Corporation Commission established a stakeholder process to develop testing standards for assessing the cost-effectiveness of energy efficiency programs implemented by utility companies within its jurisdiction.

The Commission directed its Staff to refer to the BCA framework and process outlined in the NSPM for DERs during the stakeholder process and regulation development. A comprehensive report documenting the stakeholder process, facilitated by Keystone Policy Group with technical support from Energy Futures Group and NESP, was submitted alongside Draft Regulations in March 2025.  

In a May 2025 Order, the Commission invited stakeholders to file comments on the draft regulations by June 17, 2025, and stated that on or before August 5, 2025, Commission Staff will investigate the Draft Regulations and file a Staff Report with findings and recommendations.



NESP developed a Virginia NSPM Case Study summarizing the application of the NSPM multi-step process, including key issues raised by stakeholders.

Other State BCA-Related Updates

Wisconsin: The Public Service Commission of Wisconsin (PSCW) directed Focus on Energy’s Evaluation Work Group (EWG) to review the appropriateness of its current cost-effectiveness framework for beneficial electrification initiatives. The PSCW is working with Steve Schiller, an expert on NSPM and BCA, to support a review of Focus on Energy’s BCA practices. Work Group meetings use the NSPM process to align the framework with Wisconsin’s policy goals. The EWG will provide its guidance to the PSCW in a report prior to scoping for the Quadrennial Planning Period V (early 2026).

Meanwhile in Wisconsin, in an Investigation of Parallel Generation Purchase Rates before the PSCW, the Wisconsin Local Government Climate Coalition named the NSPM as a guiding resource for industry best practices, stating that it provides a framework for Value of Solar studies. Moreover, they recommended to the PSCW that it should initiate a process to create a Wisconsin BCA that follows NSPM guidance.

New York: In the report “New York’s Grid Flexibility Potential,” prepared for the New York Department of Public Service, the Brattle Group proposed revisiting the NSPM as a potential solution to the barrier of utility BCAs being too conservative or failing to account for all relevant benefits.

Texas: In a review of energy efficiency substantive rules, Recurve Analytics recommended that the Public Utility Commission of Texas revisit their cost-effectiveness calculations in a more formal stakeholder process like that outlined in the NSPM. Additionally, the American Council for an Energy Efficient Economy (ACEEE) recommended the NSPM as a resource that the Commission should use to help quantify energy efficiency plan benefits.

Oregon: In comments on Portland Gas and Electric (PGE) Flexible Load Cost-Effectiveness proposals, Oregon Public Utility Commission Staff expressed support for the inclusion of distribution deferral credits and risk reduction value, consistent with the NSPM.

As reported in prior NESP News, it’s time for an NSPM update! Since its publication in 2020, the NSPM has become an indispensable resource, informing decisions in over 40 jurisdictions nationwide and beyond. With nearly five years of real-world application, we’ve learned what works, what needs improvement, and important gaps in BCA guidance we should address to ensure the manual remains relevant, practical, and useful as the DER landscape evolves.

In early May, NESP convened an NSPM v2 Advisory Group, represented by a diverse group of stakeholders. A range of NSPM update topics was presented, with key takeaways summarized below. 

NSPM V2 – Preliminary Advisory Group Feedback:

1. Broaden and clarify the scope of BCA and NSPM applications. Advisory Group members pointed to the limitations of traditional BCA frameworks and terminology, suggesting that the NSPM v2 should offer more guidance on its use beyond DER programs – such as procurement, pricing mechanisms, and distribution system planning. The update will address NSPM’s applicability across different regulatory contexts and decision-making processes.
2. Address evolving technologies, use cases, and planning silos. Feedback from the advisors emphasized the importance of updating guidance to reflect emerging DER technologies (e.g., virtual power plants, storage, and community solar) and expanding coverage to include gas system planning. There were also calls to better integrate siloed planning efforts to support comprehensive system planning and valuation.
3. Incorporate narrative around affordability and complementary analyses. Comments highlighted the need for a more holistic understanding of assessing affordability. BCAs should be part of a larger narrative decision-making framework that captures the full range of outcomes and values.

Advisory group members will participate in subgroups to advise on specific chapters/appendices. A new version of the manual is expected by year end.

DG and DS Non-Utility System Impacts – An Inventory

In case you missed it! This spring, NESP published State Benefit-Cost-Analysis Practices: Accounting for Non-Utility System Impacts of Select Distributed Energy Resources.

This report provides an inventory of state practices for including non-USIs in BCA efforts for three types of DERs: demand response (DR), distributed generation (DG), and distributed storage (DS).

It identifies emerging trends, key opportunities, and challenges for states in advancing inclusion of non-utility system impacts (USIs) in BCA practices. The research considered the range of non-USIs as identified in the NSPM, focusing on host customer (participant) impacts and societal impacts. Findings represent a sample of how states are accounting for different societal and host customer impacts of the specific DERs researched.

Database of Screening Practices

Interested in states’ cost-effectiveness practices for energy efficiency? You can now access the Database of Screening Practices (DSP) at its new home with ACEEE. The DSP provides information on state cost-effectiveness screening practices for ratepayer-funded electric and natural gas efficiency programs from 52 jurisdictions. The database was updated prior to transferring from NESP to ACEEE in early 2025.

September 10-11, Navigating Change Policy Conference - Energy Efficiency Alliance (KEEA and EEA NJ)

NESP Director Julie Michals will join NJ BPU, ConEd and NMR to discuss a range of issues on BCA for EE and other DERs. Don’t miss this session and other excellent panels in Somerset, NJ. Register for this event by July 11 for early bird rate!

NESP and AESP partner to offer training on benefit-cost analysis of DERs for consultants, regulators, utilities, consumer advocates, or anyone involved in planning, assessing, or evaluating investments in DERs.

BCA On-Demand Training is coming soon! ICYMI, NESP and AESP hosted an on-line live BCA training on June 24-26. This 6-hour training will be available on-demand next month, so be sure to check back at the NESP Events page soon. 

Get NSPM Certified^TM! NESP is planning NSPM Certified Training course(s) this fall. We’ll be posting details next month, so please check soon for details.

E4TheFuture serves as coordinator of the National Energy Screening Project, and manages its publications.

Contact us at NSPM@nationalenergyscreeningproject.org

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