Page 215 - Sustainable Cities and Communities Design Handbook

Life Cycle Analysis Chapter j 10 189

Weaknesses of the Ratepayer Impact Measure Test
Results of the RIM Test are probably less certain than those of other tests
because the test is sensitive to the differences between long-term projections of
marginal costs and long-term projections of rates, two cost streams that are
difficult to quantify with certainty.
RIM Test results are also sensitive to assumptions regarding the financing
of program costs. Sensitivity analyses and interactive analyses that capture
feedback effects between system changes, rate design options, and alternative
means of financing generation and nongeneration options can help overcome
these limitations. However, these types of analyses may be difficult to
implement.
Additional caution must be exercised in using the RIM Test to evaluate a
fuel substitution program with multiple end use efficiency options. For
example, under conditions in which the marginal costs are less than the
average costs, a program that promotes an inefficient appliance may give a
more favorable test result than a program that promotes an efficient appliance.
Although the results of the RIM Test accurately reflect rate impacts, the im-
plications for long-term conservation efforts need to be considered.
Formulas: the formulas for LRI RIM , NPV RIM , BCR RIM , the first-year rev-
enue impacts, and annual revenue impacts are as follows:

LRI RIM ¼ðC RIM B RIM Þ=E

FRI RIM ¼ðC RIM B RIM Þ=E for t ¼ 1
for t ¼ 1
ARI RIMt ¼ F RIM
for t ¼ 2; .N
¼ðC RIMt B RIMt Þ=E t
NPV RIM ¼ B RIM C RIM
BCR RIM ¼ B RIM =C RIM
where
LRI RIM ¼ Lifecycle revenue impact of the program per unit of energy
(kWh or therm) or demand (kW) (the one-time change in rates) or per
customer (the change in customer bills over the life of the program). (Note:
an appropriate choice of kWh, therm, kW, and customer should be made)
FRI RIM ¼ First-year revenue impact of the program per unit of energy,
demand, or per customer
ARI RIM ¼ Stream of cumulative annual revenue impacts of the program
per unit of energy, demand, or per customer. (Note: the terms in the ARI
formula are not discounted; thus they are the nominal cumulative revenue
impacts. Discounted cumulative revenue impacts may be calculated and
submitted if they are indicated as such. Note also that the sum of the