FortisBC Energy Utilities ( FEU ) 2012-2013 REVENUE REQUIREMENTS AND NATURAL GAS RATES APPLICATION B-74 UNDERTAKING NO. 41 HEARING DATE: November 15, 2011 TRANSCRIPT REFERENCE: Volume 9, Page 1377, Line 21 to Page 1378, Line 23 REQUESTOR: WITNESS: QUESTION: Mr. Fulton Ms. Smith Provide program details for the Water Heater Program and why a process evaluation for the program is being conducted when the program is going to be discontinued at the end of the year. RESPONSE: Although the 0.62 EF water heater program ends December 31, 2011, the FEU will be introducing the 0.67 EF ENERGY STAR water heater program in 2012. Since program implementation for the 0.67 EF water heater program will be similar to program implementation for the 0.62EF water heater program, the FEU wanted to obtain feedback from dealers about the strengths and weaknesses of the 0.62 EF program as well as identify opportunities to improve future water heater programs. In addition, the FEU wanted to gain an understanding of the current inventory of water heater technologies in the BC marketplace including compliance for 0.62 EF products, the presence of 0.67 EF models and tankless models. In addition, mystery shopping was conducted to determine if energy efficiency was discussed in relation to water heaters and determine the need for further dealer education. In summary, the purpose of this study was to: Gauge the market share of compliant tanks (with an E.F. > 0.62); Gauge the availability of ENERGY STAR tanks and new technologies such as tankless; Obtain feedback from dealers regarding opportunities for program improvement; Identify perceptions of the installation costs for new technologies and storage tanks; Outline how familiar dealers are with the FEU s EEC programs and how they promote efficient hot water heaters to customers; and Understand why certain dealers/contractors are active participants in the program while others did not take advantage of the dealer SPIF. The Research Brief for this project is attached. Page 1
Research Brief: Hot Water Storage Tank Program Evaluation Background Energy Efficiency & Conservation (EEC) programs are designed to help customers reduce their energy consumption by encouraging behavioral changes and the adoption of energy efficient appliances. The EEC department has established and implemented Residential Energy Efficiency programs that encourage households to reduce their overall consumption of natural gas and help customers manage their energy bills. In addition to saving energy, Residential Energy Efficiency programs focus on the following objectives: Educate consumers about the advantages of energy efficient hot water tanks and provide incentives for their adoption when necessary; Prepare the market for adoption of new energy efficient technologies through incentives, and support of government regulations; and Upgrade existing low efficiency systems to capture energy savings associated with reducing the overall consumption of natural gas. Raising awareness of FortisBC s energy efficiency programs and the tools FortisBC provides to help individuals practice energy conservation is essential for the EEC department and the firm alike in order to ensure continued funding for EEC programs and to demonstrate that the Residential EEC efforts are succeeding. A Domestic Hot Water (DHW) strategy is a key component in FortisBC s EEC program portfolio. Water heating accounts for 21% of residential natural gas consumption, the second highest domestic end-use. BC provincial regulations require that all water tanks manufactured after September 1, 2010 have an efficiency rating (EF) of at least 0.62 depending on tank size. Based on estimates from the Canadian Institute of Plumbing and Heating (CIPH), approximately 120,000 hot water tanks are sold annually in BC. The market share for gas water heaters is in the range of 40-60%. Business objectives In 2010, the primary objective of the Hot Water Storage Tank program was to educate the market about September 1, 2010 changes to the BC Energy Efficiency Act Standards for gas and propane fired water heaters. The secondary program objective was to capture the energy savings associated with upgrading water heating systems. This 2010 program offered a $50 consumer incentive, to drive public awareness about the importance of water tank efficiency through the price discounting of efficient models, to urge customers to not only replace their hot water tanks as an emergency purchase decision at the end of useful life but to be proactive prior to tank failure, and a $50 dealer incentive to urge contractors and distributors to promote efficient water tanks. Since the large majority of purchase decisions are completed out of necessity due to tank failure, customers are reliant on independent contractors to FortisBC July 6, 2011 Page 1
provide energy efficient appliances and advise them of their benefits. This program and the incentives are being continued for this year. Research objectives The Hot Water Storage Tank program currently offers incentives to both consumers and dealers. EEC would like to understand, from the perspective of dealers, the strengths and weaknesses of the program as well as identify opportunities for future programs. The purpose of this study is to: Gauge the market share of compliant tanks (with an E.F. > 0.62); Gauge the success of the program in promoting high efficient models; Obtain feedback from dealers regarding opportunities for program improvement; Identify successes/strengths of the current program that should be maintained; Identify perceptions of the installation costs for new and compliant tanks; Outline how familiar dealers are with the EEC program and how they promote efficient hot water heaters to customers; and Understand why certain dealers/contractors are active participants in the program. Study recommendations should outline opportunities for improvement in program design, highlighting specifically what dealers are looking to see in a successful Hot Water Storage Tank program, what would encourage dealers to promote the program, and identify current strengths that should be maintained in future programs. The proposed research should address the following: Are dealers engaged with the current offer ($50 incentive to promote efficient water tanks)? What would help improve the current program? Are dealers satisfied with the ease of application forms and the process to qualify for incentives? Would dealers be interested in additional training regarding efficient products? Do dealers understand EF ratings? What percentage, on average, of their sales are energy efficient models (EF 0.62, 0.67, and 0.70)? Do they sell EF 0.67/0.70 models that are Energy Star Tankless systems? Do dealers promote the energy efficient products? How? Why/Why not? What advertising methods would reach them most effectively? How did dealers feel about the $50 consumer incentive? Does the consumer incentive encourage dealers to promote the program more readily? What could be improved in the program? How many tanks are installed with permits? Target The research will target dealers, retailers, and distributors, with particular emphasis on those who have participated in the Hot Water Storage Tank program. Where dealers/retailers/distributors are aware of FortisBC July 6, 2011 Page 2
the program but choose not to participate, FortisBC would like to understand why, and determine if there are factors that would motivate future participation. FortisBC will provide the research firm with the contact information for all retailers registered in the program. Budget The budget for this study is approximately $10,000 15,000 (+HST). Timing The research is intended to evaluate the effectiveness of the Hot Water Storage Tank program. This study should be completed by September 15, 2011. The final report must be delivered by September 15, 2011. Deliverables FortisBC requires a report of findings. Submissions should include the following: PowerPoint decks Short narrative summary report Crosstabs Verbatims A presentation to FortisBC summarizing key finding from the study Special emphasis should be placed on the identification of the recommended action items (i.e., should address bolded copy in Research Objectives) in a concise, narrative summary report. Contact information Roy Chaudary FortisBC Senior Research & Evaluation Analyst 604-592-7855 16705 Fraser Highway, Surrey BC V4N 0E8 Scott Webb FortisBC Manager, Customer Programs & Research 604-592-7649 16705 Fraser Highway, Surrey BC V4N 0E8 FortisBC July 6, 2011 Page 3
Research Brief Approval Energy Efficiency and Conservation Program Area: Program Name: Partner(s): Program Manager: IO: Approval Program Manager Date Manager, Energy Efficiency and Conservation Date FortisBC July 6, 2011 Page 4