PG&E HOPPs Update: Residential Pay for Performance (P4P) Proposal

PG&E has shared a new Advice Letter updating the information on their High Opportunity Program or Project (HOPP) Pay for Performance program. You can read the letter in full here, and review an excerpted description of the program from the letter’s Appendix below:

PG&E’s Residential Pay-for-Performance (P4P) Program seeks to develop a scalable model for residential retrofits that leverages rapidly emerging market actors and products while minimizing administrative and implementation costs. There are several improvements over our existing Home Upgrade program that this new P4P program design offers. The current Home Upgrade program uses a traditional Program Administrator implementer model with participating contractors and customer incentives based on a limited set of allowable measures. PG&E’s P4P offering allows participation by more market actors and a high level of flexibility for them to choose the services and products that customers want and that achieve reduced energy consumption. Further, the current Home Upgrade program pays incentives based on predicted or deemed savings, which puts rate payer funding at risk when the savings don’t materialize. The goal of the P4P approach is to limit ratepayer risk by paying incentives only for energy savings that materialize at the meter.

After regulatory approval of this proposal, PG&E will hold a competitive solicitation for the Initial Enrollment Period (IEP) which will be overseen by a Peer Review Group (PRG) of non-financially interested parties to help ensure oversight and transparency of the competitive request for proposal (RFP) process. The RFP will seek out parties referred to as “Aggregators” who will either directly or through a network of contractors perform energy efficiency interventions in customers’ homes with the goal of maximizing measureable savings. Aggregators may consist of existing energy efficiency market participants, such as Property Accessed Clean Energy (PACE) loan providers, smart thermostat vendors, vertically integrated contractors, program implementers or new entrants to the California market. These Aggregators will compete for funding through Power Savings Agreements (PSA); we anticipate multiple bids allowing us to test different approaches, geographies and measure mixes.

The P4P program is not designed to dictate how Aggregators will work with customers. We will know specifically how the Aggregators will work with customers after proposals have been submitted. For existing programs already in the market, such as PACE and other EE loan products, as well as for new programs and other market participants, we anticipate that Aggregators will aim their offerings toward customers with the greatest savings potential and try to sell comprehensive upgrades or packages of behavioral, retrofit and operational measures (BROs) that have the highest potential for energy savings. Further, it is anticipated that Aggregators will use incentive payments available from energy efficiency measures in several ways, including, but not limited to:

  • Offering price discounts to customers for measures installed and/or discounts on loan processing fees,
  • Offering incentives to contractors,
  • Offering increased efficiency and/or improved quality of installed measures, and
  • Enhancing marketing and/or hiring more sales staff to acquire new customers.

An initial incentive budget of up to $5M will be allocated among qualified Aggregators who are selected based on criteria defined in the RFP protocol. PG&E will only pay for kWh and therm consumption reductions achieved by each Aggregator on a portfolio basis. This method reduces risk and costs by not paying for individual homes in the portfolio which have neutral or negative savings. Payments will be made annually one and two years after the initial intervention based on an Aggregator’s total portfolio weather normalized metered savings during the 12-month period in each payment cycle. Performance is measured based on weather normalized energy consumption data obtained through PG&E’s advanced metering infrastructure (AMI) and collected 12 months before and after interventions are performed. The AMI metered data reflects the consumption for the whole house; customers with multiple meters for one house will not be allowed to participate. Additional incentive payments (“kickers”) are provided to Aggregators that demonstrate net savings measured through the evaluation methodology detailed in Attachment B.

Read the program description in full here. For more on recent developments in performance-based incentives, take a look at the white paper on use of baselines for calculating energy efficiency incentives from the CPUC, with comments due later in May.

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