1. Maximizing Results from a High-Efficiency Furnace Program Jacqueline Berger, APPRISE Elliott Gold, PGW January 28, 2014

2. Presentation Outline PGW Residential Heating Equipment Rebate Program (RHER) Research Questions Market Study Impact Analysis Summary 2

3. PGWs Residential Heating Equipment Rebate Program 3

4. RHER Goals Promote selection of premium efficiency residential models. Increase customers awareness of energy efficiency opportunities. Strengthen PGWs relationship with customers as a partner in energy efficiency. Encourage market actors to provide and promote high efficiency options. Align incentives with other programs. Aid in market transformation towards the highest-efficiency options. 4

5. RHER Process Educate customers about RHER. – CSP, PGW, equipment dealers, and contractor marketing. Provide information about program eligibility and rebates to customers. – Includes a marketing document and a program application. Customers work with contractors and retailers to purchase and install eligible equipment. Customers complete the rebate application. – Proof of purchase required. – Contractor certification that the measure was installed. The CSP processes the application – Checks customer and measure eligibility. – Mails a Visa gift card (payments $500) to the customer if approved. – Notifies customer if it is not eligible, and the reason for rejection. Three percent of rebates receive a post-installation inspection. 5

6. RHER Rebates 6 Measure Original Rebate Revised Rebate Natural Gas Furnace 94% AFUE$250$500 Natural Gas Furnace 94% AFUE, ECM Fan$250$500 Natural Gas Water Boiler 94% AFUE (w/electronic ignition) $1,000$2,000

7. Research Questions 7

8. Questions What is the market for high-efficiency equipment? How can PGW best market the program? What are the incremental costs of high-efficiency furnaces and boilers? Have rebates increased penetration of high-efficiency equipment? What are the barriers to increased participation? What are the savings from the installation of high efficiency furnaces and boilers? 8

9. Market Study 9

10. Participating Contractor Sample 10 Contractors Contractors with 2 or more rebates 7/2012 – 2/201338 Interview Completed20 No Response9 Refused6 Wrong Number2 Language Barrier1

11. Maximizing Contractor Response Advance letters were sent to the contractors using priority mail. The advance letters informed the contractors about the purpose of the survey and a $100 incentive that would be provided if they completed the survey. A toll-free number was provided for contractors to call in to complete the survey. Up to 17 calls were made to contractors over a 4-week period. Messages were left three to six times for the contractors. 20-30 minute telephone interviews were conducted Interviews were completed between February 19, 2013 and March 18, 2013. 11

12. Participating Customer Sample 12 Furnace Rebate Boiler Rebate Total Check Issue Date Between 10/1/12 and 12/31/12 7760137 Phone Number or Email Address in File6757124 Sample Selected302959 Interview Completed171532 No Response9312 Refused189 No Phone Number336

13. Maximizing Participant Response Advance letters were sent to the participants. Emails were also sent to the seven participants who did not have a phone number in the file and whose phone number could not be found in our look-up. The advance letters and emails informed the participants about the purpose of the survey and provided a toll-free number for participants to call in to complete the survey. Up to nine calls were made to participants over a 2-week period. Messages were left up to four times for the participants. 5-20 minute telephone interviews were conducted Interviews were completed between March 7, 2013 and March 21, 2013. One interview was completed with a furnace rebate recipient who had no phone number available, but who responded to our email with her phone number. 13

14. How should PGW focus their marketing efforts? 14

15. Contractor Information Sources 15 How Contractor First Learned about RHER# Contractors Supplier8 Internet3 PGW Mailing3 PGW Email2 Customer1 City Displayed Brochure1 Home Show1 Trade Group1 Total20

16. Customer Information Sources 16 RHER Information Source Furnace Rebate Boiler Rebate Total Contractor10515 PGW Website235 PGW Bill Insert224 PGW Mailing112 Realtor101 PA EnergyWorks Program101 News Report011 Family011 Contractors Mailing011 Dont Know011 Total171532

17. First Customer Information Sources 17 Contractor Offered Information or Participant Asked about Rebate Furnace Rebate Boiler Rebate Total Heard from Contractor10515 Contractor Offered Information325 Asked Contractor About Rebate167 Didnt Discuss with Contractor213 Dont know/ No answer112 Total171532

18. How large is the market for high- efficiency furnaces and boilers in Philadelphia? 18

19. Annual HVAC Installations In Philadelphia Past Year 19 Installations in Philadelphia in the Past Year # Contractors Gas FurnaceGas Boiler Existing Homes New Homes Existing Homes New Homes 0010017 <2599143 25-494030 50-994110 100-1991010 5001000 Dont Know1000 Total20

20. High Efficiency Penetration 20 Percent of 2012 Installations that were High Efficiency # Contractors Gas FurnaceGas Boiler <10%22 10% - 24%65 25% - 49%23 50% - 74%43 75% - 99%45 100%11 Dont Know11 Total20

21. Do contractors know how to educate customers and market high efficiency furnaces and boilers? 21

22. Contractor Report When Information Provided 22 Situations When Contractor Educates Customer about High Efficiency Option # Contractors Always15 Majority of the Time3 When it Works in the Home2 Total20

23. Contractor Report Frequency Information Provided 23 Percent of Jobs where Contractor Educates Customer about High Efficiency Option # Contractors 100%16 90%-99%2 80%-89%1 50%1 Total20

24. Contractor Report Information Provided to Customers 24 Information Provided to Customers About Gas Usage and High Efficiency Equipment # Contractors Gas Furnaces # Contractors Gas Boilers AFUE Rating or Savings Estimate97 PGW Website Information/Savings Calculation57 Percent Savings/Cost Comparison56 Manufacturer Literature and Forecasted Savings34 Does Not Mention or Promise Savings33 Environmental Benefit11 Not much information11

25. Customer Report Information Provided by Contractor 25 Information Contractor Provided about Gas Usage and Cost Compared to Other Options Furnace Rebate Boiler Rebate Total Did Not Discuss Much4812 Gas Savings, But not Specific Amount7411 Approximate Percent or Dollar Savings325 Savings from Switching from Oil to Gas123 AFUE Percentage Differences202 Savings Based on Actual Usage101

26. Is the program increasing the frequency of high efficiency sales? 26

27. Contractor Report High Efficiency Sales Change 27 High Efficiency Sales Comparison to Before Rebates # Contractors Gas FurnaceGas Boiler Much Increased55 Increased67 Somewhat Increased33 No Change54 Dont Know11 Total20

28. Contractor Report Role of Rebate in Sales Presentation 28 Role of PGW Rebate in Sales Presentation# Contractors Big Role / Very Important14 Helps in Sale3 Depends on Customer1 Small Role1 None1 Total20

29. Contractor Report Rebate Influence on Sales 29 Extent to Which High Efficiency Sales are Due to PGWs Rebates # Contractors Extremely Important (100%)6 Very Important (60%-80%)3 Important (25%-50%)5 Somewhat Important (15%-25%)2 Not Important (<10%)3 Total20

30. Customer Report Rebate Importance 30 Importance of PGW Rebate in Decision to Purchase High Efficiency Furnace Rebate Boiler Rebate Total Very Important51217 Important224 Helpful303 Not Very Important303 Not At All Important415 Total171532

31. Customer Report Other Purchase Factors 31 Factors that Influenced Decision to Purchase High Efficiency Furnace Rebate Boiler Rebate Total Monthly Costs / Gas Savings11 22 Environmental Concerns437 Installation Issues/Venting/Size437 Resale Value101 Condition of Existing Equipment011 Maintenance011 EnergyWorks Audit Recommendation011

32. Are rebates set at the right level? 32

33. Contractor and Customer Report Rebate Sufficiency 33 Rebate Amount is Sufficient to Encourage Purchase of Higher Efficiency Equipment # Contractors# Customers Gas Furnace Gas Boiler Gas Furnace Gas Boiler Yes11151213 Sometimes22-- No7350 Not Sure-- 02 Total20 1715

34. Customer Report How Long Considering Replacement 34 How Long Considering Replacement Furnace Rebate Boiler Rebate Total Heard from contractor10515 Right after heard about rebate011 < 6 months134 6-11 months224 1-3 years235 8-10 years112 Dont Know101 Total171532

35. Contractor Report Incremental Cost Variability 35 Incremental Costs Vary Widely by Home # Contractors Yes9 No11 Total20

36. Contractor Report High Efficiency Furnace Incremental Cost 36 Incremental Costs Of High Efficiency Furnaces Compared to Least Expensive # Contractors $600-$8002 $1,000-$1,2003 $1,800-$2,5008 $3,0001 $3,5001 $4,000-$5,0001 Dont Know/Refused4 Total20

37. Contractor Report High Efficiency Boiler Incremental Cost 37 Incremental Costs Of High Efficiency Boilers Compared to Least Expensive Alternative # Contractors $600-$7002 $1,500-$2,0004 $3,0004 $4,0004 $5,0002 $4,000-$7,0001 Dont Know/Refused3 Total20

38. Customer Report High Efficiency Incremental Cost 38 Incremental Cost of High Efficiency Quote Furnace Rebate Boiler Rebate Total $600 - $1,000303 $1,001 - $1,500404 $1,501 - $2,000303 $2,001 - $3,000112 $3,001 - $4,000044 $4,001 - $5,000011 $6,001 - $7,000011 Did Not Discuss Alternatives268 Dont Know426 Total171532

39. What are the Barriers? 39

40. Contractor Report High Efficiency Barriers 40 Reasons Customers do not Install High Efficiency Equipment # Contractors Cost15 Installation issues5 Does not intend to remain in home2 Not comfortable with new technology1 Landlord renting out home1 Shorter warranty1

41. Impact Analysis 41

42. Impact Methodology Billing analysis Determination of fuel switchers Later participant comparison group Matched comparison group Findings by boiler/furnace and pre-usage level 42

43. Annual HVAC Installations In Philadelphia Past Year 43 Later Participant Comparison Group Treatment GroupComparison Group Net Savings Obs Usage (ccf)Savings Obs Usage (ccf)Savings PrePostccf%PrePostccf% % Non Normalized 20285671314416.8%16993483310110.8%435.0% Degree Day20294978316617.5%169994947484.8%118 ** 12.5% PRISM 20292677315316.5%169966944222.3%130 ** 14.1% Pooled Regression 20290375115216.8%169948896525.5%100 ** 11.0% Pooled Month Dummy 20290875615216.7%169933882515.4%101 ** 11.1%

44. Annual HVAC Installations In Philadelphia Past Year 44 Matched Comparison Group Treatment GroupComparison Group Net Savings Obs Usage (ccf)Savings Obs Usage (ccf)Savings PrePostccf%PrePostccf% % Non Normalized 20285671314416.8%190855824303.6%11313.2% Degree Day20294978316617.5%190940882576.1%108 ** 11.4% PRISM 20292677315316.5%190917897212.3%132 ** 14.3% Pooled Regression 20290375115216.8%190879851273.1%124 ** 13.8% Pooled Month Dummy 20290875615216.7%190911883273.0%124 ** 13.7%

45. Annual HVAC Installations In Philadelphia Past Year 45 Later Participant Comparison Group Degree Day Normalization Treatment GroupComparison Group Net Savings Obs Usage (ccf)Savings Obs Usage (ccf)Savings PrePostccf%PrePostccf% % Furnace162882732150 ** 17.0%12289284250 ** 5.6%100 ** 11.3% Boiler 401,220990229 ** 18.8%471,2601,219413.2%189 ** 15.5%

46. Key Findings and Recommendations 46

47. Findings Contractors do not often provide customer-specific savings estimates Contractors need more information to effectively educate customers RHER has impacted installation of high-efficiency furnaces and boilers Both contractors and customers feel RHER rebate is important in high efficiency purchase decision Customers are also likely to cite environmental concerns Incremental costs are highly variable Rebate does not usually cover 80% of incremental costs Venting barriers often present Savings estimate range from 100-130 ccf (11%-14%) 47

48. Recommendations Continuing marketing at supply houses Improve and update RHER information on PGW website Investigate whether joint marketing with electric utility is possible Train contractors on selling high efficiency equipment Consider incentive that varies based on costs or housing characteristics Revise protocol savings formula 48

49. For more information - www.aesp.org Save The Dates