The continued rapid escalation of gas prices has raised the consciousness of ratepayers to conservation and to the expenditures on utility conservation programs. The authors in the paper will present results from an innovative application of econometrics to quantification of conservation verified by metered consumption. The technique estimates coefficients for the engineering terms of heat loss equations for various residential appliances. The role of this technique in a measurement methodology and the extension to other market sectors will also be discussed.
California has long been a leader in promotion of conservation as evidenced by two generations of stringent building and appliance efficiency standards and a history of large budgets for the conservation programs of the utilities. With these large budgets came the need for accountability to the ratepayer for use of these funds. SoCalGas developed its first crude conservation measurement models in 1975 and began on a path of never ending refinements. The first major refinement, a portion of which will be described in the second chapter of this report, was precipitated by a 1978 California Public Utilities Commission (CPUC) order to SoCalGas in that year's rate case decision. It required SoCalGas to, among other things, separate price from conservation impacts on consumption and to consider using a multiple regression approach to determine overall impact of conservation programs. SoCalGas accomplished these two requirements through Conditional Demand Analysis and econometric modelling, described in Chapter Two. In a 1980 decision, the CPUC further advanced the cause of conservation by confronting SOCal with the threat of up to a $5,000,000 penalty and the hope of up to a $5,000,000 reward for demonstrated conservation achievements in the year of 1981. The basic responsibility for achieving the goal and the burden of proof was squarely on SoCalGas with the probability of a penalty much higher than that of a reward. The relevant portion of CPUC Decision 92497 as modified by CPUC Decision 92714 read as follows: "Should SoCal fail to save at least 59.7 Bef1/at the conclusion of the test year, it will be penalized Sl.0 million for each 1.1 Bcf it falls short of the goal for a maximum adjustment of $5.0 million. There will be no penalty assessed if the conservation savings fall in the range of 59.7 - 62. 5 Bcf. Should SOCal produce conservation savings in excess of our 62.5 Bcf goal, for each 1.1 Bcf above that level, a $1.0 million reward will be earned to a maximum of $5.0 million."
As part of an ongoing effort to upgrade its forecasting capabilities and to satisfy the regulatory requirements of both the California Energy Commission (CEC) in its Biennial Report (BR) process and the CPUC, SoCalGas had been developing a series of end-use forecasting models. These provided an ideal framework for incorporation of Conditional Demand Analysis and also produce very stable forecasts in contrast to macro-econometric models of that time.