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Definitions and Discussion of Benefit-Cost Tests

Name
Alterative Name(s)
What it measures Benefits Costs Strengths Weaknesses
Total Resource Cost Test (TRC) Will the total costs of energy in the utility service territory decrease? Energy-related costs avoided by the utility; Capacity-related costs avoided by the utility, including generation, transmission, and distribution; Additional resource savings (i.e., gas and water if utility is electric); Monetized environmental and non-energy benefits; Applicable tax credits. Program overhead costs; Program installation costs; Incremental measure costs (whether paid by the customer or utility). Determining whether a program is worthwhile; identifying programs that lower total system cost.   Requires quantification of all non-energy benefits, which may be infeasible in practice and are thus near-universally ignored in TRC calculations.
Program Administrator Cost Test (PACT)
Utility Cost Test (UCT)
Administrator Cost Test
Utility Resource Cost Test (URCT)
Will the cost to the utility/ program administrator increase? Energy-related costs avoided by the utility; Capacity-related costs avoided by the utility, including generation, transmission, and distribution Program overhead costs; Utility/ program administrator incentive costs; Utility/program administrator installation costs Determining appropriate level of incentives; No need to quantify non-energy benefits. Considers only administrative costs.
Participant Cost Test (PCT)
Participant Test
Will the participants benefit over the measure life? (Benefits and costs from the perspective of the customer installing the measure) Incentive payments; Bill savings; Applicable tax credits or incentives Incremental equipment costs; Incremental installation costs Evaluating program design and program marketing; and setting program contribution levels. Not useful for determining whether program is worthwhile
Societal Cost Test (SCT)
Societal Test
Is the utility, state, or nation better off as a whole? Energy-related costs avoided by the utility; Capacity-related costs avoided by the utility, including generation, transmission, and distribution; Additional resource savings (i.e., gas and water if utility is electric); Non-monetized benefits (and costs) such as cleaner air or health impacts Program overhead costs; Program installation costs; Incremental measure costs (whether paid by the customer or utility) Broader public-interest perspective than TRC test. As the TRC test, requires quantification of non-energy benefits which may be infeasible.
Rate Impact Measure (RIM)
Non-Participant Test
Will utility rates increase Energy-related costs avoided by the utility; Capacity-related costs avoided by the utility, including generation, transmission, and distribution. Program overhead costs; Utility/ program administrator incentive costs; Utility/program administrator installation costs; Lost revenue due to reduced energy bills Assessing average costs to non-participants; serving as a warning of possible cost-shifting impacts.   Can be used erroneously to reject programs with zero program cost; ignores benefits to non-participants; should be used in conjunction with resource planning as a comparison with alternative price impacts.

 


For further discussion of Cost-Effectiveness Tests, useful resources include:


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