Kansas City, Kansas July 23-24, 2008

1. Midwestern Governors Association Energy & Climate Stewardship PlatformEnergy Efficiency Advisory Group Kansas City, Kansas July 23-24, 2008

2. Meeting Agenda Wednesday, July 23 • Welcome and Introductions • Review and approval of EEAG Meeting # 2 Summary • Review of Purpose and Goals of Meeting • Briefing on Status of the Other Advisory Groups • System Dynamic Model Overview and Demonstration • Begin Discussion of Policy Options • Brief Review of Major Elements of Each Option • Detailed Review/Discussion Starting with EE-6 and EE-5 Thursday, July 24th • Continue/Complete Discussion of Policy Options • Proposed Order, EE 4, EE-3, EE-2, EE-1, EE-7 • Next Steps and Timeline 2

3. Purpose/Goals of Meeting • To ensure policy options text is in near-final form, adding and refining existing text as needed. • To identify any gaps in the policy options text. • To decide which options can be quantified. • To decide on main parameters for CCS quantitative analysis (level of improvement relative to standard practice, participation levels, timing). • Gather enough detail about individual policies to model their impact on the energy system (using the system dynamics model), e.g.; specific goals that can be quantified • To receive an update on existing initiatives and identify additional initiatives. 3

4. Purpose/Goals of Meeting Review of Overall Goals of EEAG The EEAG is to develop a much more detailed set of policy recommendations and action items, based on the seven options in the MGA platform Determine which options are “quantifiable”, and model their contribution toward meeting the MGA goal of reducing energy consumption by 2 percent per year by 2015, and by a further 2 percent each year thereafter Set quantitative goals for participation and effectiveness for each option, specific timing for option implementation Identify concrete initiatives for near-term implementation 4

5. Previously Agreed Upon Definition of MGA Energy Efficiency Goal MGA Energy Efficiency Goal from Platform “Meet at least 2% of regional annual retail sales of natural gas and electricity through energy efficiency improvements by 2015, and continue to achieve an additional 2% every year thereafter.” Previously agreed upon interpretation of goal (developed by members of advisory group preceding MGA Platform signing) In 2015 each utility shall achieve an annual electric energy and gas savings goal equivalent to 2% of gross annual retail kWh sales. These savings goals are calculated based on the most recent three-year weather-normalized average. At least 1.5% of the 2% goal must be achieved through energy efficiency improvements on the customer side of the meter.  The additional .5% energy savings can be met through electric utility infrastructure improvements, and these savings must result in increased energy efficiency greater than that which would have occurred through normal maintenance activity.

6. Previously Agreed Upon Definition of MGA Energy Efficiency Goal (con’t) Description of how savings are measured (discussed at EEAG Meeting #1) Savings are measured with a “bottom up” assessment of results from programs and policies. Savings from each program, measure and policy are added. Goal is met if the total savings for a given year equals 2% of the prior year’s sales. Some states use a rolling average of sales for the previous 3 years as the baseline instead of just the prior year’s sales. Some states weather-normalized data to set the baseline

8. Subgroup Structure Four Subgroups Subgroup #1, working on EE-2: “Energy Efficiency Potential Studies” Subgroup #2, working on EE-1: “Establishment of Energy Efficiency Goals”, EE-3: “Making Energy Efficiency a Priority”, and EE-4: “Removal of Disincentives to Energy Efficiency” Subgroup #3, working EE-5: “Building Codes” and EE-6: “Leading by Example” Subgroup #4, working on EE-7: “Best Practices” Starting point is been text from MGA platform, material from EEAG “breakout groups” at April MN meeting and Revised through subsequent input. 8

9. EE-1: “Establish Quantifiable Goals for Energy Efficiency” States/provinces commitment to implement all cost-effective energy efficiency (EE) measures (with definition of “cost-effective”, including CO2 value) Investment in R&D toward future measures Separate supply-side (not quantified) and demand-side (2%/yr by 2015) efficiency savings goals Majority position, not unanimous Emphasis on consumer education Sharing of information among peers regarding effective energy efficiency programs Encourage partnering among a variety of “players” to meet EE goals 9

10. EE-2: “Undertake Assessments that Quantify the Amount of Energy Efficiency that Would Cost Less on a Unit Cost Basis than New Generation” In the near term, produce a white paper addressing EE/ conservation potential in Midwestern states Objectives: Review, summarize Midwest EE potential studies, implications for MGA goals; identify shortcomings and gaps in those studies; produce a core set of principles and methodologies for inclusion in future EE potential studies; use findings to build momentum for EE potential studies in each jurisdiction Longer-term goal of comprehensive EE/conservation potential assessments by utilities, energy offices, or other entities in each jurisdiction Utilities perform Integrated Resource Planning that includes EE/conservation potential, models impact of CO2 price 10

11. EE-3: “Require Retail Energy Providers to Make Energy Efficiency a Priority” Electric, gas utility resource plans should use all achievable cost-effective energy efficiency goals, targets, and strategies before reliance on new supply Mechanisms include IRP, EE standards for utilities, cost recovery, self-directing of EE funds (with monitoring and verification requirements) for large-volume customers and possibly others, consistent measurement across jurisdictions Goal of 2%/yr demand-side savings by 2015 Majority position, not unanimous Challenges include implementation under different degrees of deregulation, treatment of large-volume customers 11

12. EE-4: “Remove Financial Disincentives and Enable Investment Recovery for Energy Efficiency Program Costs” Provide for reliable EE program/service cost recovery; address lost revenue; provide new opportunities for utility earnings related to achieving EE goals; balance interests of consumers and shareholders Remove disincentives to utility EE investments using tools such as rate design, decoupling of sales from revenues Provide incentives for utilities to pursue energy efficiency 12

13. EE-5: “Strengthen Building Codes, Appliance Standards and Requisite Training, Quality Assurance and Enforcement” Strengthening of Building Energy Codes and Code Adoption—improve building EE in the US by 30% relative to 2006 IECC standards, most recent ASHRAE Commercial Codes, by 25% relative to Canadian model codes, and regularly update Provide Training related to Building Energy Code Implementation Appliance/Equipment Efficiency Improvement Certification programs for energy-efficient appliances, equipment, buildings Upgrading Existing Buildings, and “Beyond Code” Construction, including incentives, upgrades at sale 13

14. EE-6: Have the Public Sector Lead by Example Applies to government-owned and non-government buildings with >20% of construction costs funded with government money Requires new buildings/major retrofits to meet stringent energy, water performance standards (recommissioning goal, regular certification) Set energy, water efficiency guidelines for procurement based on performance standards for equipment to be purchased Fund and demonstrate existing and new technology – for pilot applications and for education EE for new/existing low-income housing, with specific energy use goals, funding to support EE measures. Encourage energy conservation via education/outreach 14

15. EE-7: “Accelerate Adoption of Energy Efficiency Technologies and Best Practices by Commercial and Residential Customers” Expand network of organizations providing energy efficiency outreach/consumer awareness beyond utilities Provide public benefit funds directly to manufactures and service providers in addition to utilities Create/reinforce education programs at K-12 levels on energy efficiency, climate change mitigation relationship Provide information to building professionals on building EE opportunities (best practices brochure/website), regulatory/financing incentives for adopting energy-efficient building practices (TIF link) Broaden utility incentives and allow utilities to do performance contracting Provide information to building occupants (including commercial) to help assess energy costs of a building 15

16. Discussion of Policy Development Progress Review, discussion of draft text by full EEAG Order—EE-6, EE-5, EE-4, EE-3, EE-2, EE-1, EE-7 Which elements need more detail or emphasis? Following slides provide input from facilitators on options that may require more attention. Which elements might be problematic? For which options is quantification appropriate? Candidates for parameters, and values of parameters. Ideas for data sources Are there opportunities for consolidation of options, especially where options overlap? 16

17. EE-6: Have the Public Sector Lead by Example Potential Focus Areas for Discussion Need to agree to a target energy efficiency figure for low income housing. Assign specific meaning of “stringent energy standards” for public buildings, for purposes of analysis? Reference is made to Enterprise Green Communities. Is this specific reference appropriate? Is the goal of 20% of all existing government buildings commissioned/recommissioned appropriate? What energy savings should we expect from this? 17

18. EE-5: “Strengthen Building Codes, Appliance Standards and Requisite Training, Quality Assurance and Enforcement” Potential Focus Areas for Discussion Need to review some language for appropriateness to Canadian context. Should we specify a date by which 80% of building code inspectors will be required to have a specified number of training hours? Other initiatives to improve enforcement? Need to resolve (1) appropriateness of 30% above 2006 IECC code, (2) a target date for this to occur, assuming agreement on 30% figure, and (3) whether timing of code upgrade will be consistent or vary across jurisdictions. Need to address vague language regarding appliance standards. Should we quantify beyond-code improvements? 18

19. EE-4: “Remove Financial Disincentives and Enable Investment Recovery for Energy Efficiency Program Costs” Potential Focus Areas for Discussion Additional detail on tools to remove utility disincentives for EE investments Implementation goals and timing for policy design elements other than decoupling Additional specificity on implementation mechanisms 19

20. EE-3: “Require Retail Energy Providers to Make Energy Efficiency a Priority” Potential Focus Areas for Discussion Need to address additional input regarding implementing energy efficiency goals in restructured markets Clarify text regarding opportunities for residential customers to self-direct efficiency improvements, and discuss arrangements and credit to states/utilities for large-customer self-directed improvements Confirm/clarify MGA goal, timing, measurement, and confirm application to utilities and states Discuss differences between application for gas, electric Parameters for quantification? Add detail to implementation mechanisms as needed 20

21. EE-2: “Undertake Assessments that Quantify the Amount of Energy Efficiency that Would Cost Less on a Unit Cost Basis than New Generation” Potential Focus Areas for Discussion Update on white paper funding. 2nd, longer term, goal may require additional detail. What would role of MGA be? Is it necessary to have language included on cost of studies? Jurisdictions should require that utilities perform Integrated Resource Planning that includes EE/conservation potential, models impact of CO2 price: This item notes that “MGA may want to make a recommendation…” Should this language remain as is? 21

22. EE-1: “Establish Quantifiable Goals for Energy Efficiency” Potential Focus Areas for Discussion Clarify goal and timing consistent with decisions on EE-3 Discuss overlap between EE-1, EE-3, EE-4, and approaches to quantification Parameters for quantification? Clarify supply-side goals, approaches to quantification (as appropriate) Parameters for quantification? Existing assessments of supply-side EE potential? 22

23. EE-7: “Accelerate Adoption of Energy Efficiency Technologies and Best Practices by Commercial and Residential Customers” Potential Focus Areas for Discussion Address areas of overlap with other EEAG options Are some of the initiatives included in EE-7 candidates for inclusion as implementation mechanisms under other options? Are there elements of EE-7 that should stand alone? Which elements of EE-7 should/could be quantified? Parameters for quantification? 23

24. EEAG Next Steps and Timeline Incorporate full-group comments into draft text and circulate for follow-up comments Begin process of quantification CCS prepares calculation structure, initial analysis Data gathering with EEAG assistance Review/advice by small groups or full EEAG? Complete text of recommendations to MGA, draft analysis before October EEAG meeting Analysis, finalization of text with review, input as needed from subgroups and/or full group 24

25. Energy Efficiency Advisory Group Facilitation Team • Lola Schoenrich • lschoenrich@gpisd.net • Jennifer Johnson • jjohnson@gpisd.net • Matthew Brown • matthew.brown@interenergysolutions.com • David Von Hippel • dvonhip@igc.org 25