Evaluation of Public Service Electric & Gas Company`s standard offer program, Volume I

In May 1993, Public Service Electric and Gas (PSE&G), the largest investor-owned utility in New Jersey, initiated the Standard Offer program, an innovative approach to acquiring demand-side management (DSM) resources. In this program, PSE&G offers longterm contracts with standard terms and conditions to project sponsors, either customers or third-party energy service companies (ESCOs), on a first-come, first-serve basis to fill a resource block. The design includes posted, time-differentiated prices which are paid for energy savings that will be verified over the contract term (5, 10, or 15 years) based on a statewide measurement and verification (M&V) protocol. The design of the Standard Offer differs significantly from DSM bidding programs in several respects. The eligibility requirements and posted prices allow ESCOs and other energy service providers to market and develop projects among customers with few constraints on acceptable end use efficiency technologies. In contrast, in DSM bidding, ESCOs typically submit bids without final commitments from customers and the utility selects a limited number of winning bidders who often agree to deliver a pre-specified mix of savings from various end uses in targeted markets. The major objectives of the LBNL evaluation were to assess market response and customer satisfaction; analyze program costs and cost-effectiveness; review and evaluate the utility`s administration and delivery of the program; examine the role of PSE&G`s energy services subsidiary (PSCRC) in the program and the effect of its involvement on the development of the energy services industry in New Jersey; and discuss the potential applicability of the Standard Offer concept given current trends in the electricity industry (i.e., increasing competition and the prospect of industry restructuring).