The NSPM core principles are now helping to guide stakeholder processes in Virginia and Washington state, though in very different contexts.

Virginia: A new BCA test for efficiency programs

On July 17, 2024, Virginia enacted a law requiring the State Corporation Commission (“Commission”) to promulgate regulations establishing a single, cost-effectiveness test for use in evaluating proposed energy efficiency programs. The Commission was directed to develop this test using the benefit-cost analysis (BCA) framework from NESP’s National Standard Practice Manual (NSPM).

The Commission opened Docket PUR-2024-00120 and convened a stakeholder group to inform the development of a new cost-effectiveness test in a 7-meeting series launched September 2024. E4TheFuture and Energy Futures Group (EFG) are retained as subject matter experts to assist stakeholders; the process is facilitated by Keystone Policy Center. This process/comments will culminate in a report with recommendations that will be used to develop proposed regulations for commission review and approval.

Four planned virtual stakeholder meetings – held bi-monthly – were held to date:

1. Overview of NSPM for BCA of DERs and current BCA practices in Virginia

2. Review full range of utility system impacts including applicability and materiality of different impact categories; review initial inventory of VA’s applicable energy policy goals and impacts and gaps in current utility systems practice

3. Map priority policy goals to relevant non-utility system impacts,

4. Confirm consensus (or non-consensus) on recommended impacts to include in a Virginia jurisdiction-specific test.

Stay tuned for updates on Virginia’s process via NESP News.

Washington: A New Cost Test to Apply to Large Electric-Gas Combined Utility Integrated System Planning

The Washington Decarbonization Act directs the Utilities & Transportation Commission (UTC) to adopt rules by July 1, 2025, to implement consolidated integrated system planning (ISP) requirements for large combination electric-gas utilities, and to adopt by rule a cost test for emissions reduction measures achieved by large combination utilities to comply with state clean energy and climate policies. The cost test rule development is occurring concurrently with the ISP rules (Docket U-240281) and will be incorporated into the final rulemaking.

The Decarbonization Act sets forth the legislature’s intent for large combination utilities to decarbonize their systems by:

a) Prioritizing efficient and cost-effective measures to transition customers off of the direct use of fossil fuels at the lowest reasonable cost to customers;

b) Investing in the energy supply, storage, delivery, and demand-side resources that will be needed to serve any increase in electrical demand affordably and reliably;

c) Maintaining safety and reliability as the gas system undergoes transformational changes;

d) Integrating zero-carbon and carbon-neutral fuels to serve high heat and industrial loads where electrification may not be technically feasible;

e) Managing peak demand of the electric system; and

f) Ensuring an equitable distribution of benefits to, and reduction of burdens for, vulnerable populations, highly impacted communities, and overburdened communities that have historically been underserved by utility energy efficiency programs and may be disproportionately impacted by rising fuel and equipment costs or experience high energy burden.

The UTC retained Synapse Energy Economics, with E4TheFuture, to support its efforts to develop a cost test, guided by NSPM principles, where applicable. A series of technical conferences with stakeholders held this fall will culminate in draft and final rules in 2025. The UTC is also being supported in this docket with facilitation services by SEPA in the ISP technical conferences, and by LBNL and PNNL, through the national lab state technical assistance program. Future issues of NESP News will provide updates on this expansive and complex docket.

How are other states using or referencing the NSPM?

Over a dozen jurisdictions have applied or are using the NSPM to inform their cost-effectiveness analyses of DERs across North America. In more than 30 other jurisdictions, the NSPM is being recommended. For details on state references, including recent ones in Indiana, Colorado, Massachusetts, Connecticut, Illinois, and Michigan, see this summary of NSPM references.

The National Energy Screening Project (NESP) and the Association of Energy Services Professionals (AESP) launched a training program in 2024 for utilities, consultants, regulators, consumer advocates and others involved in planning, assessing and/or evaluating investments in DERs. Build your knowledge on benefit cost analysis and other related topics!

Become NSPM Certified^TM!

Conducting BCA for Distributed Energy Resources using the NSPM

Dec. 11-12, 2024 In-person 2-day training Washington, DC

Attendees who complete this course will gain a solid foundation of BCA core principles, an understanding of how BCA fits within a broader regulatory decision-making framework, and hands-on experience delving into hypothetical BCA exercises for example DER use cases.

Earn the NSPM Certified™ credential to:

1) be well-positioned to apply NSPM guidance to your work;

2) differentiate from other practitioners, as jurisdictions increasingly reference and use the NSPM to guide DER evaluations.

Instructors: Chris Neme (Energy Futures Group), Steve Schiller (Schiller Consulting) and David Pudleiner (ICF).

See the full course description and register here.

How to Conduct a Distributional Equity Analysis to Inform DER Investment Decisions

Dec. 2-4, 2024 (1-3pm ET daily) Virtual Training

(Earn CEUs/PDs)

Many states and utilities are looking for ways to account for energy equity when deciding whether and how utilities should support DERs. This multi-day course will describe how distributional equity analysis can be used in conjunction with benefit-cost analyses to assess the equity impacts of distributed energy resources. 

Instructors: Jasmine McAdams (Lawrence Berkeley National Laboratory); Alice Napolean (Synapse Energy Economics) and Quinn Parker (Encolor Consulting).

and equity in program design.

See the full course description and register here.

Accounting for Federal Tax Incentives and Other Transfers in Benefit-Cost Analysis of DERs

Jan. 21, 2025 (1-3pm ET) Virtual Training

(Earn CEUs/PDs)

Learn how “transfers” – i.e., when an impact on one party is exactly offset by an inverse impact on another party – can be identified and accounted for in benefit-cost analysis (BCA) for distributed energy resources (DERs). The guidance builds on the NSPM and expands upon its guidance.

Tax incentives for installing or otherwise implementing energy technologies are one example of an impact that might be considered a transfer. With the recent significant increases in federal tax incentives for installing clean DERs, it is critical that they be properly characterized and accounted for in BCAs. Other examples of transfers that will be addressed are treatment of utility performance incentives, market price effects and host customer incentives.

The course will present key questions to consider in determining whether an impact is a transfer or not and will explain how the determination depends upon the scope of the BCA test being applied, i.e., whether it is the Utility Cost Test (UCT), the Total Resource Cost Test (TRC), the Societal Cost Test (SCT), or a Jurisdiction-Specific Test (JST).

Instructor: Tim Woolf (Synapse Energy Economics)

See the full course description and register here.

As NESP has worked with jurisdictions around the country using the NSPM, we’ve developed companion documents to support application of the NSPM guidance. These include:

Methods, Tools & Resources Handbook for Quantifying DER Impacts for Benefit-Cost Analysis. While the NSPM provides guidance on identifying what benefits and costs should be accounted for in a jurisdiction’s primary cost-effectiveness test, this MTR Handbook, created by Synapse Energy Economics, provides technical information on how benefits and costs of DER investments can be quantified. Available as an online resource (or original PDF). Get the MTR Handbook (2022).

How to Conduct a Distributional Equity Analysis (DEA). With state policies identifying equity as a key goal alongside achieving carbon emission reductions, how to account for equity has been a central topic in BCA dockets where the NSPM is being applied. But BCAs do not adequately address equity in terms of the distribution of cost and benefits to different types of utility customers – in particular those that a state defines as ‘priority’, e.g., underserved, disadvantaged or marginalized customers. To address this gap, E4TheFuture, with US DOE (via LBNL) co-funded the development of an essential companion document to the NSPM: Distributional Equity Analysis for Energy Efficiency and Other Distributed Energy Resources – A Practical Guide (US DOE, 2024)