Cost Benefit Testing

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The National Efficiency Screening Project (NESP) is a group of organizations and individuals that are working together to improve the way that electricity and natural gas energy efficiency resources are screened for cost-effectiveness. The purpose of this initiative is to improve efficiency screening practices throughout the United States, and to help inform decision makers regarding which efficiency resources are in the public interest and what level of investment is appropriate.

Show your support by completing the form below. By completing this form, you acknowledge that you have read the National Efficiency Screening Project Mission Statement and agree to become a member of the National Efficiency Screening Project.

Read the Project's mission statement here.  

You can read NESP's current recommendations for improving cost-effectiveness testing in this downloadable document, "The Resource Value Framework: Reforming Energy Efficiency Cost-Effectiveness Screening" or this presentation which was given by Tim Woolf of Synapse Energy Economics, Inc. at the 2014 ACEEE Summer Study in Pacific Grove, CA.
You can download a new article, published in the October 2014 Public Utilities Fortnightly magazine, on how energy efficiency can help with 111(d) compliance and how cost-effectiveness reform is crucial for realizing energy efficiency's full potential.
You can also download a paper written in the fall of 2013 that discusses the concepts underlying the Resource Value Framework in more detail here.


Utility cost-effectiveness tests are used by program administrators, utilities, and regulators to understand whether the benefits of an energy efficiency program outweigh its costs.

The California Standards Practice Manual, which serves as the reference for cost-effectiveness testing across the U.S., outlines the rationale and methodology for five tests, each of which represents a cost-benefit ratio from a different perspective. The tests include the Participant Cost test, Ratepayer Impact Measure test, Program Administrator (PAC) test, Total Resource Cost (TRC) test, and the Societal Cost test.

Almost every state uses one or more of these tests to determine the cost-effectiveness of a program – or portfolio of programs – implemented. The TRC is by far the most widely used test because it is designed to determine whether a program increases or decreases the cost of energy within the utility’s service territory. Choosing the most appropriate test and determining how it is implemented is crucial to account for the full value of energy efficiency resources.

No matter which test is used, it can provide a distorted view of costs and benefits if all the costs and only some of the benefits are included, or vice versa. This is particularly true in the case of energy efficiency programs because many of the widely acknowledged benefits for consumers, the environment, and society – for example, increased comfort and indoor air quality, environmental protection, and national security – are difficult to quantity and are therefore not included in these tests.

Because incentives aimed to advance home performance are tied to a program’s cost-effectiveness, it is crucial to ensure that all benefits of energy efficiency programs are included in the calculation of a program’s cost-effectiveness.

To learn more about the Project and its work, click here.