Page 223 - Sustainable Cities and Communities Design Handbook

Life Cycle Analysis Chapter j 10 197

and maintenance, installation, program administration, and customer dropout
and removal of equipment (less salvage value). For fuel substitution programs,
costs include the increased supply costs for the energy-using equipment
chosen by the program participant only in the case of a combination utility, as
mentioned earlier.
In this test, revenue shifts are viewed as a transfer payment between par-
ticipants and all ratepayers. Although a shift in revenue affects rates, it does
not affect revenue requirements, which are defined as the difference between
the net marginal energy and capacity costs avoided and program costs. Thus, if
NPV pa >0 and NPV RIM <0, the administrator’s overall total costs will
decrease, although rates may increase because the sales base over which
revenue requirements are spread has decreased.

How the Results Can Be Expressed

The results of this test can be expressed as NPV, BCR, or levelized costs. The
NPV is the primary test, and the BCR and levelized cost are the secondary
tests.
NPV pa is the benefit of the program minus the administrator’s costs, dis-
counted over some specified period of time. An NPV above 0 indicates that
this demand-side program would decrease the costs to the administrator and
the utility.
BCR pa is the ratio of the total discounted benefits of a program to the total
discounted costs for a specified time period. A BCR above 1 indicates that the
program would benefit the combined administrator and utility’s total cost
situation.
The levelized cost is a measure of the costs of the program to the
administrator in a form that is sometimes used to estimate the costs of utility-
owned supply additions. It presents the costs of the program to the adminis-
trator and the utility on a per kW, per kWh, or per therm basis levelized over
the life of the program.

Strengths of the Program Administrator Cost Test
As with the TRC Test, the PAC Test treats revenue shifts as transfer payments,
meaning that the test results are not complicated by the uncertainties associ-
ated with long-term rate projections and associated rate design assumptions. In
contrast to the TRC Test, the Program Administrator Test includes only the
portion of the participant’s equipment costs that is paid for by the adminis-
trator in the form of an incentive. Therefore for purposes of comparison, costs
in the PAC Test are defined similarly to those supply-side projects that also do
not include direct customer costs.