Using electrification to add beneficial load to your grid

David: OK, thank you. Let's go ahead and get started. Good afternoon, everybody. My name is David Pickles. I lead ICF beneficial electrification practice, and thank you very much for joining us today.

We're excited to share with you some of the developments in the burgeoning field of beneficial electrification. But before we do that, I'd like to go over a few of the ground rules for this webinar with you. First of all, attendee lines will be muted throughout the webinar. We will be answering questions at the end of the presentations if we have time. You should see on your control panel a questions box. So please, please feel free to enter your questions there. We will get to as many of those as we can during the webinar, and to the extent that we can't, we'll be happy to get those questions to the panelists and hopefully they can follow up with you after the webinar is complete.

The webinar is being recorded, and all registrants will receive an email with a link to the archived presentation later this week. And as we close the webinar, we will be giving you a link to a survey that we would ask you complete not only to help us improve the quality of future webinars, but also we're trying to collect and share some information on the status of electrification initiatives across the industry, so there are a few questions there around what's going on. So we ask you to do that, and everybody who does will receive a summary of that survey results later on this week.

So I'm excited to have with me today a couple of folks who've been very actively engaged in electrification initiatives for some time. Our first presenter today will be Lana Lovick. Lana is manager of revenue growth programs for Entergy. In her current role, she is responsible for growing Entergy’s revenue and electric load through promotion of voluntary electrification programs. Lana previously served as manager of energy efficiency for Entergy Corp. and manager of regulatory affairs for Entergy New Orleans.

Our second speaker today will be Vicki Nichols. Vicki is director of customer solutions and market development for the Jacksonville Electric Authority. Vicki leads their emerging market strategies and implementation for electrification, IDR dynamic pricing, IOT smart home, and electric and water demand-side management. Vicki and Lana will both be talking a little bit about how their programs came into being, what the justification was, how they rolled it out, what some of their experience and lessons learned have been, and where they plan on taking the programs over the next few years.

Then I'll be spending a little bit of time talking about the business case for beneficial electrification programs, both the internal business case to management—and particularly the business case and the regulatory process necessary to get approval for those programs.

So with that, I'd like to turn it over to Lana Lovick to kick us off.

Lana: Thanks, David. Good morning—or afternoon, I guess now. My name is Lana Lovick, and I do manage Entergy’s electric technology program. I'll give you an overview of how our program began, how it's evolved, some of the roadblocks that we've encountered, and where we planned to go in the future.

I know we have a lot to cover, so we'll just dive right in. Much of you know who Entergy is—it's an investor-owned utility with 30,000 megawatts of generating capacity, 2.8 million customers across five operating companies, and we have 13,000 employees.

You may not know much about our electric technology program. We started that process in 2014 with a single offering, and we've expanded it to other technologies. The goal of our program is to increase load and/or revenue for Entergy, and the program is part of our regulated utility business.

We can go to the next slide—our agricultural irrigation program was our first electric technology offering. The program educated farm owners and operators on the benefits of using electric motors rather than diesel motors to run their irrigation pumps. Rather than offering cash incentives for this, we used our line extension policies in each operating company to provide benefits to the customers. Entergy would pick up a large core part of the cost to expand our distribution lines to the well so the farmers would have a lower out-of-pocket cost to electrify their well.

Go on to the next one—electric irrigation wasn't a new business for us when we started this. We'd been electrifying irrigation pumps for a long time, but we didn't have a formal program or outreach to measure the impact on our business. In 2014 we decided to try and grow this business segment, so we engaged ICF for market research and implementation services and began documenting our results in 2015.

The next slide—our results to date, we've converted about 3,000 motors since 2015. We've increased our customer satisfaction by giving our customers a direct point of contact, and by formalizing the program, we've ensured that the line extension policies were uniformly interpreted across each operating company.

Next slide—as we began tracking our progress, a couple of patterns emerged for us. First, our sales team was doing such a great job at selling the program that we picked up a lot of the low-hanging fruit pretty quickly. Because of this, we saw an ever so slight decline in our conversions every year. We had forecasted this, so this wasn't a great surprise to us. And you can see in this top chart that the annual—over the years—you see an annual decrease in electric motor installation each year.

The second thing we learned is that there is a great deal of seasonality in the ag market. Approximately 75% of our conversions occur in the first and second quarters of the year, so our sales team had the bandwidth to sell additional products or sell in additional markets. At the sales team’s suggestion, we added grain bins, cotton bins to their targeted sales. Our plans were to expand our electric technology program beyond agriculture, and we had originally planned to add additional staff to do this. However, because of the seasonality and what we were seeing, we decided to try and add new products without expanding the sales team.

Next slide, in 2017 we launched our new electric technology program. Many of the ideas for the new programs were a result of our employee-driven excellence program where employees can submit ideas for revenue and [inaudible]. ICF assisted us again with research around the addressable markets for these technologies within our service territory.

Next—based on this analysis, we moved forward with program offerings around electric forklifts, digital billboards, and truck-stop electrification. We considered several other additions, such as oil and gas pump jacks electrification but decided against them for various reasons. For the project, it was because oil and gas prices were low at the time we were looking at the offering, and oil and gas companies, we found, were sophisticated enough to make the decisions to go electric where it made sense for them.

Next slide—I mentioned earlier that we decided we could add program staff to our portfolio without adding sales reps. We currently have five field reps across the four states. They're located near our market opportunities. They work directly with our customers but also with dealers, manufacturers, and through strategic partnership.

Next slide—we've continued to test different promotional strategies for the program. We use both our line extension policies and cash incentives now to promote the program and to transform the market. Our new programs primarily use cash incentives, but there are some cases where we need to make a large capital outlay, and where we do that we use our line extension policy instead of cash payments, similar to the way we use those with our ag program—and an example of this would be, for sure, power where we need to expand our distribution lines to stock.

We offer customer incentives—and because of my background in energy efficiency—I pictured these programs to work similarly to our energy-efficiency program where our trade allies or our dealers for some of the technologies, like forklifts, would take the customer discount off their invoice, and then we’d reimburse the dealer for the customer's incentive amounts. We found that in most cases, this didn't really work the way it was planned, so while we work with the dealers, we primarily pay our incentives directly to customers. We're currently offering a separate dealer incentive for forklifts, and I was actually opposed to doing that in the beginning. I thought that the dealers could see that there was an advantage to offering incentives to the customer and that would be enough of a marketing advantage that they would just promote the program. Some did take advantage of that marketing—additional marketing that we gave them. But we found that, really, we wanted to see, I guess, we wanted to test the market, to see if the dealer incentives really did make a difference. So in the fourth quarter, we instituted a dealer-specific incentive, and we found that it has increased sales.

One of our biggest hurdles was educating our employees about the program. Our employees are one of our most efficient marketing channels since they're constantly out in the field and talking to customers, but it's hard to get our employees to stop and think about helping sell this program when they're so busy with their own work.

We did a company-wide roadshow, an internal online article to educate employees of the program, but we also began offering them a $25-per-unit incentive for qualified leads that they provide to us. And as for the customer incentives, we have a list of prescriptive incentives on our website. You can see those on this slide, and we add to that periodically based on experience in the field. We also offer customer service based on individual projects not covered under the prescriptive incentives.

We can go to the next slide—we've also developed a website this year, which has as our program details in our online incentive application, and the focus search engine optimization on our website brought us a number of projects as well.

We can go to the next slide—we've also utilized partnerships to promote the program where it's mutually beneficial. We've worked with Ducks Unlimited and USA Rice to cross-promote our program and available grant opportunities. We've also worked with university industrial assessment centers where college students are working with their professors to advise industrial customers on efficiencies.

Next slide—I also wanted to touch base on some of the barriers and the roadblocks and lessons learned that we've encountered along the way. For our agricultural programs, we learned that it's highly dependent on economic and environmental conditions that are largely out of our control. Some of these are diesel prices and commodity prices. When we started the program, commodity prices and diesel prices both seemed to take a dip right around that time, so those probably did have a detrimental impact.

The results are highly dependent on weather as well—whether it’s a wet or dry season—most since we've started have been wet. Also we've seen tightened lending for farm loans over the last couple of years.

Despite all of this, the program's been successful thanks in large part to our field staff and the relationships developed with our engineering and construction groups. But a new eTech Program—the internal employee awareness—was a big issue. The presentations and employee incentives have helped. We also, for dealer buy-in—it takes time for the dealers to understand the benefits to them. And believe it or not, it's not always easy to convince customers that programs are real. They look at you like you're crazy sometimes when they look at you—“and wait, you're giving me money to buy an electric forklift?”—and they're wondering what the catch is. We've even had customers when it turned down the incentive because they didn't know how to account for it in their accounting system. All of this basically just to say it can be really hard to give money away sometimes.

We can go to the next slide—so despite the challenges and the roadblocks for our program, the program has been a success, and this year we've surpassed our goals by about 20%. We've seen a compound annual growth rate for year end in 2018—it's expected to be about 55% since program inception.

You can go to the next one—we've also initiated a customer satisfaction survey this year. We found that participating in our electric technology program increases our customers’ overall satisfaction rating with Entergy.

We can go to the next one—and based on our work this year, we're looking to add new technologies to our portfolio. We've already added level-2 EV chargers this year, but we'd like to expand that offering to include builder incentives to add chargers to new subdivisions that are built. We'll also focus our efforts on truck refrigeration, fleet electrification, and port.

We can go to the next slide—so thank you, and I encourage you to go to our website—entergyetech.com—for more information on the program. And this concludes my presentation, and I will turn it over to Vicki.

Vicki: Thank you, Lana. Hi, everyone, it's Vicki Nichols. I am the director here at JEA over customer solutions and new market development. We have all of the emerging markets here. Very happy to have this opportunity to share the electrification market with you.

A little bit about JEA. I actually have only been here about a year, and we're located in Jacksonville, Fla. Jacksonville has 22 miles of beaches, extensive park systems, world-class fishing, and crabs—wonderful crabs. Oh, I'm sorry, you don't want to hear that—I've always wanted to do that. Yeah, I've always wanted to open with the features of our territory that are different than utility because during utility presentations my whole career—we always start with the norm, that here is our norm, that outside of those dazzling chamber of commerce features, we are a nonprofit. We are the eighth-largest municipality in the United States—one of the largest water and sewer utilities in the U.S. We serve about a little less than half-a-million customers on the electric side, just a little bit less than that on the water and sewer side. We're an electric distribution/transmission, water distribution, sewer, and reclaim water.

Three things we hope to leave you with today—is to create an understanding of what electrification is and what it means to JEA now and in the future—reflect that JEA has one of the earlier and more successful electrification programs in the country. We started in 2014 with a quantitative and analytical approach. And then we implemented a program that customers value because it is open to a broad range of technologies and can be customized to new approaches when it leads to our ability to now scale on the programs and the opportunities this presents to JEA.

I think that it’s going to be a takeaway for these presentations [inaudible] and Lana is that electrification—one of the beauties of it is it is customizable to your strategic needs as the utility.

Slide three—So why electrification? Like most all utilities, JEA has experienced declining electric sales from resulting widespread EE behavioral changes and EE technology and product adoption and the onset of distributed energy resources and other common factors to our industry.

The onset of the surge in energy resources is a big factor here in Florida in Jacksonville for us. JEA needed a new strategy. What strategy could accelerate sales during off-peak hours, defer our major capital investment, provide high value to both customers and JEA and establish stronger relationships and trust with our customers in our market, and, importantly, reduce greenhouse gases and improve the customer's working environment as well as the entire environment?

Well, electrification could do all of that, we discovered. So in 2014, electrification became a clear proposed strategic solution for us. JEA has partnered from the beginning with ICF as our consultant and implementation contractor. They developed an initial market study to explore the vast variety of commercial equipment that can be transformed from fossil fuel to electric fuel or batteries, providing numerous benefits to our customers and to JEA.

Slide 4, please—so electrification supports four—all four—of JEA’s core values. We've been in strategic planning, and these are our new values and how it ties—it supports our financial value by increasing electric sales and revenue, primarily off-peak. JEA system average efficiency load factor increases, and average costs decline.

Secondly, it supports customer value by decreasing average rate, and electric technologies also reduce customer’s total cost of ownership—they reduce maintenance costs and lower noise pollution in the customer's facility. It supports environmental value—the emissions associated with the additional electric generation are more than offset by the reduction in emissions at a customer site.

And finally, it supports community impact since incentives for lighter electric technology can be a powerful tool in economic development packages and encourage additional businesses to locate within JEA’s territory. Since the 2014 beginning, JEA has pursued a two-prong strategy, addressing both on-road and off-road (or non-road) opportunities.

This was one of the first comprehensive electric strategies in the country where these efforts have made JEA a leader in this space, and we're now in good company with utilities all over the country considering engagement for the first time or starting programs.

Our on-road program focuses on electric vehicles to encourage customer adoption. JEA launched a rebate program for EV customers purchasing or leading a new EV. To date we have incentivized 319 PEVs, and additional models are appearing on the market now—so the numbers are beginning to climb, and we are considering new program offerings.

JEA, too, has participated with the North Florida transportation planning organization PPO and the Department of Energy and car manufacturers to launch a network of charging stations across the territory. These strategic partnerships are very important—no, I'm good. Some 26 public and workplace stations were established, and we've had Nissan, Tesla, and others added to the network, and Jacksonville has now a network of some 53 stations to meet customer range anxiety, if you will. So we've expanded a great deal.

We're also working with Drive Electric and following the development of the Volkswagen Mitigation Trust Fund, and we're prepared to act as a liaison for our commercial customers and community organizations participating in the projects that come from that fund.

It does appear that there will be set aside for charging stations for personal electric vehicles as well as potential categories for specific fleet projects. Jacksonville has a major highway, I-95 corridor, and it’s destined to receive some DC charging stations as a part of the federal Electrify America project.

You can see how important those strategic partners are to boosting your efforts. Now on our off-road program, it's presently a bit of our Holy Grail given its immediate growth potential and high ROI for customer-satisfaction levels. This program focuses on conversion of commercial and industrial diesel propane equipment to electric. Popular examples include forklifts, airport ground-support baggage-handling equipment, cranes, and welders. Some incentives include both custom and prescriptive rebates, and it's open to a broad range of technologies and can be customized to customer approaches, which leads to our ability to now really scale this program.

This program features direct business-to-business outreach by JEA and ICF account engineers to perform detailed customer electrical process analysis that generate customer solutions and sales.

Slide five, please—the on-road program has been effective and has laid a solid foundation for what we believe will be a significant opportunity in the future. Its components are listed there with incentives ranging from—in the center, you can see 500 to 1,000 per PEV—and results are now on track to generate $400,000 in annual revenue based on 1,100 EVs in Jacksonville by the end of 2018 and generate a program ROI of 135 percent. This is based on eight-year lifetime ROI of the battery warranty period.

So there are no losers here. The market is difficult at starting—the EV market has been slow. It's been on set for years, but it is starting to emerge at a faster rate. And ROIs are tremendous. One of the challenges with this is incenting the correct behavior for adoption, so we'll be looking at those very dynamically now and in the future to readjust our rebates to keep that growth supported.

Slide 6—the non-road program has been extremely successful and is perhaps our most comprehensive and impactful in one of the most in the United States. There are significant opportunities to expand this program for us and for most of utilities in the country. The program addresses a broad range of technologies, ranging from material-handling equipment to custom industrial process equipment. It is a high-touch for customers, providing comprehensive technical support and education while still being vendor neutral. The program is responsible for almost $9 million in annual revenue with an annual budget of approximately $900,000 at this time.

The program generated an ROI over 1,200 percent, and the minimum ROIs run around 45%, so that is one of the better success stories in electric history there. Most of the growth in our sales—only 70% have been off-peak as desired and as designed, so these are customizable programs. There are so many opportunities that exist across markets. It is not out of the question for utilities to be able to strategically tailor them to their company's goals and their marketplace strings.

Slide 7—customers receive notable benefits from this program, and as a result, think significantly more favorable about JEA. There have been almost 300 individual participating customers to date, ranging from small businesses to national brands. Some of my favorite quotes are the ones that not only indicate how happy the customers are, but reveal how influential the program was in the decision to go electric, which is a very key element—different than so many of our energy-efficiency programs in the past where that was—that kind of value was sometimes embedded.

The quote that Lynn Westbrook made from Jacksonville Port Authority is really reflective of our program that they say when we first entertained the idea of going electric from diesel with our cranes, they were skeptical, but the program worked very well for them, and they've reduced their annual goals, electric vs. diesel, and are looking forward to more conversions in the future. These cranes have been an icon of our program, and Jacks Port is a good one as the port is already working on three additional cranes with another three to be started within three to five years. The revenues from the cranes are significant, and JEA will now and in the future be up to nine cranes with this customer in operation. That's a significant growth potential just with that one customer.

One notable characteristic about the quotes here is the customers admit to being skeptical at first but then coming to rely on JAE as a trusted partner, delivering leading awareness on new technologies that can only enhance peripheral equipment like forklifts, but the equipment that is fundamental to operations, like gantry cranes.

Slide eight—know that procurement, on the lessons learned, know that procurement and manufacturing play a significant role as a commercial customer may be anxious to get involved immediately, but in order for, like, get involved immediately, but in order for a large number of forklift or a special-order piece of equipment may take several months, even a year, to get through the procurement process and fit into a manufacturer's schedule. This is why forecasting and follow-up are significant parts of the sales process. You all as utilities have seen some of those processes in the past. And, you know, one of the few downsides to this market is it does have a very, very long sales cycle—a very close and personal engagement with the customer and their procurement and budget processes that can make it a very persistent market.

ICF’s initiatives and proactive process has been very helpful in growing a satisfied and supportive customer base among small- and medium-sized businesses, which are often a hard-to-reach sector and otherwise may have had no contact with us or other utilities rather than just paying a bill. These customers now are very engaged and a very good market for this engagement in addition to the large industrials. The business-to-business outreach strategy to deliver education on technologies through electrification, in addition to the program incentives, has created a high level of satisfaction and a valued new market for JEA.

Next slide— jumping the hurdles, as utilities start up a program educating customers on beneficial electrification is essential, like Lana said—sometimes it's really too good to believe, and the story that our engineers—and our JEA and ICF engineers—are out there telling has to be told over and over again to really, for them, to accept and begin to embrace what the opportunities are.

Focus on understanding beneficial electrification and the needs of your utility and market play to develop your own optimum strategic implementation plan. All of our plans can vary, and they can be very unique to your own utility territory—as a result have very different profitability, but all are proving to be very profitable.

Observe the value of in-depth one-on-one business outreach contacts, and you should fully leverage them for immediate and broader value across your portfolios. These are very close customer relationships that are formed once these sales take place. We've spent a lot of time with these customers, and we've built loyal relationships that can benefit us in many different ways.

And lastly, this is a long-term project plan. So, for example, the order for 33 golf carts for fleet landing a military assisted-living facility has been delayed twice due to manufacturing scheduling issues. The original order for the super cranes at the port required first building a new substation to accommodate the new cranes and the six additional cranes planned over the next three years. So that these are just examples of what a complicated sell cycle can be. Not all are, but they can be, so be in it for the long haul with the customer. The rewards are definitely worth the persistence.

And the last side—given the declining electric revenues and new market disruptions, this is really a time for boldness and innovation for the electric utilities. We strongly believe that here at JEA. When meeting now beyond our inaugural program efforts and electrification, and we have opportunity to pursue much greater loads, such as commercial port super cranes, refrigerated trucks, infrared, painting equipment, robotics, data centers, conveyor equipment, welders, floor scrubbers, tugboats and ferries, on-shore generation for dock shipping, indoor-air agriculture—which is significant—and airport ground and baggage carts, to name just a few. Those are our few. You're going to have those that vary in your territories, and you're going to have lists that look just as long but very broadly from our list, given our strategic differences.

In our program going forward, it's kind of important to know that our emphasis is going to be building on the success of our prior program over the last four years and scaling our infrastructure and budget to yield benefits commiserate with the size of the opportunity.

We want to focus on broadening the base of eligible customers and provide opportunities for more customers to participate and create additional value for JEA.

We want to, importantly, increase the number of load shaped flexible technologies to support additional demand-response, storage, and vehicle-to-grid options, thereby increasing efficiency of JEA system and balancing the load characteristics.

We're going to be looking at non-cash incentives techniques, such as discounted rates for off-peak charging in lieu of an incentive and other techniques to draw participation and off-peak charging. Expansion of on-road technologies along with additional focus on collaboration with regional transportation authorities is going to be key, including JEA’s own opportunities with our fleet.

And lastly, we want to ensure that the new load occurs at the times and locations most beneficial to our system, as you would yours, and these are becoming increasingly more important to balancing the grid. Through all of these changes, JEA is going to—is planning to—quadruple our revenue and values from these programs. We're going to put—we're also going to put downward pressure on rates and provide a more flexible and efficient load shape for JEA and significantly reduce our JEA footprint.

In closing, JEA is currently engaged with ICF to develop our strategic plan for electrification over the next 90 to 120 days. We look forward to working with ICF over the next five years on all aspects of this exciting new market, and we look forward to a very close partnership in all aspects with our program, our customers, and the JEA team that’s executing this. Electrification has opened new pathways for utilities unlike those we've seen in numbers of years—able to deliver customer value and have a measured positive impact on electric revenues, not recently seen in a long time.

I want to say thank you to my JEA and ICF program team. Some are in the room today, certainly on the phone. These teams have done an absolutely amazing job here in our territory with the electrification program and the leadership through the new path that they've had to figure out on these new program opportunities. And I'd like to thank all my utility friends and ICF for being on the call today. If there's anything that JEA team can help you with, please give us a call. David—

David: Thank you, Vicki, I appreciate that. So for those of you who don't know ICF, perhaps just a little bit of background about who we are.

Next slide, thanks—we're a large energy and policy and environmental consulting firm as well as implementation delivery function, so we do a broad range of activities really in nine verticals. The ones that are most relevant here—we all work with energy and utilities as well as our extensive work with transportation, which includes regional and state and local transportation authorities as well as some of the large transportation companies.

Our services around electrification vary from high-level strategic planning and technology assessment—as well as market research and market assessment—all the way through program design and implementation as well as—and what I'm going to talk about in large part today—regulatory policy and testimony that's oftentimes necessary to get both executive management support for the programs as well as regulatory approval for the programs.

Next slide—so for us, beneficial electrification really rests on seven pillars. I'm going to talk briefly about those pillars really because those are the basic topic areas that we find it's necessary to explore quantitatively and to build the business case around as one is putting together a filing and approaching regulators—and Lana and Vicki have spoken to these in some ways, but let me expand on them just a little bit.

Certainly managing the slow, slow sales growth that many electric utilities have been faced with, our analysis suggests that for a reasonably modest program for a representative electric utility, one could increase annual energy sales about 0.75 percent, net sales about 0.75 percent, certainly that is subject to some assumptions. And if one believes that on-road transportation takes off significantly or through a very strong industrial opportunities, those numbers can certainly be much larger, but we can fairly easily get to those kinds of annual sales impacts with a comparatively modest-sized program. A program of that size can put annual downward pressure on rates of about 2% a year, and as we're actively thinking about five or six different regular proceedings across the country, and in many cases, that focus on the downward pressure on rates—when and how is it realized, how is that shared between shareholders and rate-payers has been the focus, so we're seeing a very strong emphasis on not only talking about that downward pressure or the high impact, high level, but also quantifying how it will really be administered.

Of course, as we look at the pressure for decarbonization of the grid, beneficial electrification typically takes site-based emissions down to zero, and depending upon the generation makeup of the utility, net emission is going to decline up to about 85%—so a very strong decarbonization opportunities there, and lots of questions in a filing about how to demonstrate that and how to value that, which I'll talk to more little bit later as we address the cost-effective miscalculations.

Vicki certainly mentioned the need to use these technologies in part to support flexible loads as we get more renewable and dispatchable in other DER resources on the grid. The need to have ways to accommodate that with dispatchable load is becoming more and more valuable—and certainly many of these technologies—whether it's the battery bank for electric forklifts, whether it's managed charging, whether it's vehicle-to-grid, or things like forklift grade technologies—the flexible load shaped value of the beneficial electrification programs can be significant, not only on a system-wide basis but on the distribution system, so one of the tools that's available through the program is to be able to manage on a feeder-by-feeder basis people's adoption of technologies and to manage that and to vary the incentives to drive different kind of behaviors on different areas of the service territory.

Customers universally loved the programs—both Vicki and Lana spoke to that, I think, very eloquently, but you know we typically see customer costs decreasing anywhere between 10% and 60%, in addition to some of the other benefits that many of the electric technologies have—whether it's lower maintenance, whether it's lower emissions, whether it's quieter in the industrial sector, whether it's due to increased temperature control or increased precision or a lack of defects—so there are a lot of non-energy benefits that one can talk about and that drive participation.

So in many ways, beneficial electrification cuts across those things, and I think many people would intuitively agree to that. But when I think about the—go the next slide, please—people's response to that—has really been along three axes—one is different technologies, so one tends to think about beneficial electrification primarily or initially perhaps as a passenger vehicle and a charging—and a charging—activity—that over the past five years has really expanded to include a variety of technologies we see that—whether it's custom manufacturing—whether it's materials handling, which has been very popular—and increasingly, we're seeing interest and programs introduced that provide both space and electric water heating.

There's a broad range of technologies being applied across a broad range of locations, including fleet and in-route charging, and I think particularly important is the breadth of strategies that are available. We tend to think of infrastructure deployment, recharging networks, as well as incentives as being the primary tools that have been available. That's no longer the case. We're seeing extensive use of rate design and demand for regulators to be thinking about rate design—and as Vickie suggested—using special rates to promote off-peak charging and potentially discounted rates in lieu of the traditional cash incentive as well as working with planning organizations and increased deployment of both manage charging an active load management. So the toolkit is pretty comprehensive.

Next slide—so they're about 40 or so utilities across the country that have passenger-vehicle programs—that are about 18 or so that have non-road programs that cover a broad range of technologies. Of those 18, I think 12 are recovering the costs from customers through rates in some format, summits through base rates. It's through the energy-efficiency clause. In some cases it’s deferral to a regulatory account and then amortization after a future rate case.

But we're seeing much broader regulatory support for these programs than one might have historically, and I think when you think about how the industry has evolved and some of the historic prohibitions on promotional practices or the approaches towards fuel switching, it was really done in an environment of 20 or 30 years ago when electric low growth was pretty robust—one really wasn't focused on the decarbonization strategy, one really wasn't focused on the flexible load shape, and utility programs were primarily about energy conservation.

Now that we've transitioned to—or in the process perhaps of transitioning to—efficiency programs are more about the efficiency of the energy system in general—that includes increasing load factor and promoting off-peak sales and decarbonization. The overall receptivity to these programs has been very good in the past few years.

Next slide—now having said that, the regulatory process can indeed get quite muddy quite quickly. There are some questions that get raised by the regulators, and in some cases, that has deferred or delayed approval of these programs.

What I thought I would do here is capture just some of the general categories where people have been asking questions or taking positions counter to the utilities—the interveners in these cases tend to be pretty broad. Certainly, the office of people's counsel or a consumer advocate commission staff oftentimes will see folks like the Sierra Club and NRDC intervening, typically taking fairly positive stances to the people—see a state Department of Energy taking a position oftentimes around electric vehicles and the charging network and sometimes asking for carve-outs around serving the low-income community. But we also see people like the petroleum marketers and convenience store association—we’ll oftentimes see the gas company intervening, so there is a broad range of constituents that are represented in some of these general categories here.

So I want to talk about all of them, but let me just choose a few to highlight here. Certainly, free-ridership and necessity of the program tends to be something that requires a great deal of support in the filings. There's oftentimes concern that these programs are revolving naturally, so whether it's in the charging side through Electrify America or the VW settlement or through some anti-idle or idle-reduction rules that some department of natural resources may have—there is a sense that existing regulation or existing market programs are going to be driving this. And in some cases, they do—they do support some adoption—but in general, we think there's a great deal of opportunity to build upon and around those programs to drive a significantly greater penetration.

But people need to understand that. So whether it's that forklifts—electric forklifts—although they may have approximately a 50% market penetration today—that incremental 50% is not happening without a program, and it still provides great value to the electric utility.

I talked a little bit about fuel-switching prohibitions—we did a survey last year, two years ago now—of all 50 jurisdictions and what their regulations and precedents were around fuel switching and around promotional practices, and in almost all cases, those were litigated a long time ago in a different era, and many of the justifications for those approaches that we would suggest are no longer valid. So there's a lot of, I think, opportunity to reconsider those as opportunity to build upon a lot of the rationale that was developed originally for economic development investments, which are almost universally recovered in rates—so how do we build upon that in order to build the business case for a beneficial extrication has been an effective point of discussion.

Lots of concern about stranded assets, and I think the need to do some good calculation around that, particularly given the scale of these programs—you'll see that there's a debate in the industry at the moment around electrification and is it good or is it bad. And there's concern around forced electrification and essentially the banning of certain fossil fuels for electric in space heating—what that might do to the distribution grid and capacity.

Well, one end of the spectrum, if we were to move all the way to that level of electrification, I think, yes, there's a case to be made that a lot of it wouldn't be cost-effective given the investments that would need to be made. However, where we stand today in the amount of electrification that's coming on the grid—and that is proposed in most cases—most utilities—at least the ones that we've worked—have got pretty good capacity available, not only from a generation standpoint but also from a distribution-system standpoint. So in the filing, being eloquent about that and helping to assuage any of the concerns that regulators might have about the costs that this program might impose, I think, is an important activity.

Defining cost-effectiveness tests is an area with a lot of work being done with the typical California standard practice manual tests that regulators are used to applying for energy-efficiency. You only have limited use in this environment—the TRC test that many regulators have historically relied upon really isn't defined for electrification opportunities. The rim test is, certainly, I think, a valuable indicator, but how to define a test that touches some of these other pillars that I mentioned—so how do you quantify the non-energy benefits? What's the value of emissions?—is one opportunity. There is some work being done by [inaudible] on something called the holistic test, which is really a hybrid of the CRC and the societal tests. There are other folks doing other elements of the work. We found, quite frankly, that the programs are so cost-effective that some of those refinements to benefit cost testing aren't always necessary, and, quite frankly, they complicate the arguments and make it difficult for regulators to wrap their minds around—so I think that there's a balance to be struck between getting very elaborate cost-effectiveness testing vs. getting some of these programs approved, and we'd be happy to share those thoughts with you.

Another area that requires a fair amount of education is the program design and the program cost. And this—as Vicki mentioned—these programs tend to require a lot of hand-holding. We're asking people to do something that's more radical than we've historically asked them to do in energy efficiency where we're asking them to do something that is oftentimes a similar technology in the same fuel—we're asking them to choose a more efficient option. Here we're asking them to make a radical choice—build a battery room, change the way they approach their production process. And so those programs are typically more costly, require more hand-holding, have a different incentive profile than they might otherwise. And so the fact that these can be, from an administrative standpoint, fairly expensive administratively and sometimes call into question the prudence of the programs by regulators—and so there's an education process that one needs to take them through.

And then the last thing I’ll touch on on this slide—is the concepts of cost-recovery and allocation and found margin treatments. And so there's a level of precision that seems to be required in BE filings that isn't required in energy-efficiency filings—the way that rates are calculated and the precision and the impact on tail blocks and billing ratchets and the way that that gets calculated and how that is treated in rates and whether you're in a traditionally regulated state, whether you have performance rate making—you have bandwidths—there's an expectation in the BE filings that that is tracked and calculated and allocated in a way that, at least in our experience, is much more precise than what is typically found in an energy-efficiency filing. So lots I think to hear that to help get a regulatory filing that's accepted. The good news here is that although there are some complex issues here, the costs of inaction here, I think, are much more widely understood and embraced particularly by regulators than otherwise. So a traditional environment where a filing might be rejected in support of refining, revising, modifying, putting together stakeholders—what we're seeing here, hopefully, is a greater level of urgency around trying something, piloting, and refining it if you need to.

Next slide—let me just touch just briefly on some of the issues that resonate with utility executives in addition to everything that we just talked about for regulators. But sizing and prioritizing the technologies—there seems to be oftentimes a bit of a gridlock around what should be pursued. So should one be pursuing on-road, off-road, port electrification, and ground support equipment? One of the things that we find it very helpful to do is quantify all of those technologies using similar information at the same time—so one could come up with a perspective around what the priorities should be, what the entry strategy should be, and it depends very much on what some of the scale and materiality needs may be—but one of the things that some of the very early programs suffered from was a lack of scale on materiality relative to the earnings of the overall holding company, so providing a vision for how quickly you get to something that shows up in the earnings per share has been an important activity as well as thinking through what entry strategies and partnerships may be. I think there's a lot of interest at utilities about using the key accounts force who have good relationships with the large segments portion of the customer base. And that is indeed true, and those people can be very valuable to this kind of activity. But as I think Vicki mentioned, there's a large portion of the customer base that, while they're very good targets for these kinds of programs, wouldn't typically have key accounts support—so how do you access those? How do you go to them with trade eyes? How do you go through them with new account forces? Something that's of interest to many folks.

And then I think the final thing I'll touch on here is the complexities associated with non-electric modeling. Electric utilities are very used to modeling their own system, but when we're looking at these kind of programs—understanding what the impact on the gas system may be, how cost-effectiveness is a function of for heat pumps—heating degree days—and the scale of the program—the concepts of dynamic avoided costs—and really being able to articulate end-use efficiency and when one fuel might be better than another and how that changes with different assumptions about service territory is a new analytic skill for many utilities and requires a little bit of investment there.

So I've got a couple of other slides in the deck that I won't speak to too much of them—skip to my last slide if I may, the trends slide—so we are seeing a few trends, certainly on the transportation side: We're seeing a movement beyond traditional make-ready tires for vehicle charging into hybrid models where the utilities will either provide incentives to third parties to own the transport or the charging infrastructure or own or operate them themselves. We're seeing a movement by people who've been in the transportation business into the non-road business and for those that's entered the non-road business, particularly with things like material handling—we're seeing them expand fairly quickly into industrial and custom measures to give them some additional flexibility and perhaps some bigger projects.

There is, I think, value to crawling, walking, running here. And that's why some of the material-handling programs have been so popular since they don't require the coordination and alignment of other things like the market for electric vehicles. So that's been an early entry point, but I think it serves as a good springboard to do some of these more advanced activities that folks are looking here.

Residential/commercial space water heating is coming. I think we're going to be going back into the end-use wars, and so I think having a robust set of understanding of policy precedent and analytic proceedings is going to be necessary there.

Around cost-recovery, we're seeing some filings to include the beneficial electrification in the EE mechanisms as those policies shift from system conservation to system efficiency.

We're seeing several utilities proposing to defer their costs as a regulatory asset and then amortize them either with or without a return at the next rate case—that has some nice attributes in the lines—the recovery of costs within the benefits associated with those investments are being manifested in the additional sales base over which costs are recovered—so that's got some nice attributes to it too.

And we're seeing an increased focus on making sure that we don't lose sight of low-income support communities as we move through that process.

So with that, we have perhaps just a couple of minutes for some questions. Let me see what we have here. We have one question about the—and I think this is for you Lana—what's the basis of the annual growth rate that you were quoting?

Lana: That is the growth rate in revenue since the program started in 2015 to where we are today.

David: Right. So it's the revenue growth rate.

Well, we have a few more questions, but we are out of time, so I will go ahead and finish the presentation there. I would ask that you look for the link to complete the survey. We do value those. If you have any more questions, feel free to provide those in the comments to the survey. Other than that, my thanks to Vicki and Lana for taking the time to present to us today, and thank you all for your attention. Goodbye.