EE-02 Incentive Guideline - Simple Payback of Customer Investment 2013-02-25
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EE-02: Incentive Guideline - Simple Payback of Customer
Investment in Energy Efficiency
New York State Department of Public Service
Office of Energy Efficiency & the Environment
Energy Efficiency Guidance
Approval: Colleen Gerwitz
Title: Deputy Director, Office of Energy
Efficiency & the Environment (OEEE)
Issuance / Revision Date: 2013-03
Effective Date: 2013-03
I. Purpose:
Within the Energy Efficiency Portfolio Standard (EEPS) program, two main cost tests are applied before
new energy efficiency measures are added to a Program Administrator (PA) commercial or industrial
program. The first is the Total Resource Cost (TRC) test and the second is the customer payback test. The
customer payback test is based upon the customer’s net investment in the energy efficiency measure(s)
and other factors. It results in a number indicating the number of years in which the investment is
recouped by the customer. This guidance document is issued to clarify what is meant by the payback of
the customer’s investment in a measure, how it is to be calculated, and the implications to establishing
customer incentives / rebate levels.
II. Background:
In its October 23, 2009 Order the Commission recognized that many C&I programs included proposals to
offer prescriptive rebates based on a percentage of different factors including: a) measure cost; b)
incremental measure cost compared to standard-efficiency equipment; or c) the incremental measure
costs, including installation costs. It further discussed how the variations in the rebate levels could lead to
customer confusion and inequalities for customers. To address this, it established a guideline:
As a result, we establish a guideline that the total incentive paid for any rebate will not exceed an
amount that produces less than a one-year payback period for commercial customers and one-
half year for industrial customers.1
This order also established caps for projects to ensure that a disproportionate amount of funding would
not be spent on a few projects. It did not, however, define/calculate how the customer’s investment in the
equipment/measure was to be determined. As a result there have been inconsistent interpretations of the
rule. A number of PA’s have used the incremental cost (cost difference between the energy efficient and
the minimally-compliant model/version of the equipment) as the customer’s investment. Other PA’s have
used the total customer cost less any incentives received from the PA as the customer’s investment. The
two different methods utilized to calculate payback produce widely varying results.
1 2009 Order Approving Certain Commercial and Industrial Customer Energy Efficiency Programs With
Modifications, p. 28.
