Southwest Utility Offers Energy Cost Guarantee

Christina B. Farnsworth is one of only three life members of the National Association of Real Estate Editors. She writes for Better Homes and Gardens, HOME, and Professional Builder. Her fourth book, Alternative Building Systems,will soon be published by Fisher Books.

Table 1. Electric Heat Pump Simulated Monthly Operating Costs Month Cooling Heating January $0.62 $30.94 February $2.28 $29.81 March $6.31 $17.69 April $14.24 $8.02 May $30.33 $4.18 June $53.21 $0.10 July $57.44 $0.00 August $52.77 $0.00 September $39.67 $0.10 October $20.30 $5.16 November $4.39 $18.86 December $1.68 $32.93 Totals $283.21 $147.80

Table 2. Monthly Fuel Use and Cost Month Electric use (kWh) Electric costs January 1086.5 $88.52 February 1093.2 $89.06 March 993.7 $80.96 April 972.5 $79.23 May 1067.2 $100.09 June 1267.6 $118.89 July 1311.6 $123.02 August 1261.8 $118.35 September 1123.3 $105.35 October 970.7 $91.04 November 984.6 $80.22 December 1123.9 $91.57 Totals 13256.7 $1166.29

Table 3. Prescriptive Standards Building Envelope Description Insulation R-Value Overall U-Value Ceiling   R-30 0.0335 Sidewalls Frame or masonry under 30 #/cf R-191 0.0655 Sidewalls3 Crawlspace or basement R-7 (4 ft) Floors3 Over crawlspace or unheated basement R-19 0.05 Concrete slab Perimeter insulation N/A N/A Window glazing Maximum glazing area as a percentage of the gross floor area of conditioned space; insulating value & shading coefficient shown. 15% of the conditioned floor area U = 0.64 SC = 0.742 Exterior doors A steel or fiberglass door with an insulated core R = 2.6 0.385 Infiltration control Seal joints and cracks with special attention to foundation sill plate, window & door frames & utility penetrations 0.4 ACH 0.4 ACH Mechanical systems Rating Heat/Cool System Heat pump (split system) 12 SEER, 7.0 HSPF Heat pump (single system--package) 12 SEER, 7.0 HSPF Water source--70° entering 3.8 COP Distribution Forced air space conditioning requires R-6 insulation on all sections in unconditioned system spaces. All joints must be mastic sealed. Return plenum must be completely sealed. Return must be properly sized. R-6 (10 % loss/gain) Water heating Electric EF = .90 Heat pump water heater EF = 2.88 1. A 2 x 4 wall with either blown in blanket or cellulose and R = 3.6, or R-13 batts and R-4 rigid foam board with stucco outside and sheetrock inside will qualify. 2. Determined to be a partially thermally improved metal (TIM) or wood frame with dual, tinted glazing. 3. Choose one of these standards. 4. Includes all insulation materials (cavity, rigid foam board, etc.) 5. Adjusted for framing.

Steps to Launching a Successful Energy Certification Program 1. Do your homework.  Make sure you get thorough technical knowledge on all the energy efficient measures you propose to promote, as well as up-to-date climate data and a reliable simulation program. 2. Launch the program where it will get a lot of attention.  Thousands of people attended the Street of Dreams during a six-week period. Much of the media coverage focused on the energy efficiency of these luxurious homes. Each home sported a sign telling visitors exactly what the heating and cooling guarantee cost would be.  3. Educate builders and their subcontractors on how they can benefit. Builders benefit from training that improves energy efficiency of homes and from tests that demonstrate quality, especially in terms of fewer callbacks. Co-op advertising with the utility increases builders' name recognition and maximizes their advertising potential. 4. Provide a tool to make the intangible tangible.  Miramonte Homes was already doing many of the construction requirements for the program, but buyers didn't necessarily see that, or understand why it is valuable. The low energy cost guarantee puts a clear value on these energy efficiency measures, while eliminating buyers' fears about new technology.

Table 4. Thermal Performance Standards House Size Heat Gain (Maximum) Less than 1350 ft2 15 Btu per hour per ft2 Between 1350 and 1850 ft2 13 Btu per hour per ft2 Between 1850 and 2350 ft2 12 Btu per hour per ft2 Greater than 2350 ft2 11 Btu per hour per ft2 The Heating, Cooling and Comfort Guaranteed Home must conform to this thermal performance standard for total design heat gain at the specified design conditions. All air distribution and mechanical equipment must meet TEP's inspection guidelines and minimum efficiency and installation standards as noted in the prescriptive standards table.

This 3,855 ft2 TEP Guarantee home was built by The Kemmerly Company. Its average daily heating and cooling costs for the year come to $2.82 (less than $90 per month).

This 5,200 ft2 TEP Guarantee home was built by Louis Marson & Sons Incorporated. TEP promises average annual heating and cooling costs of $3.59 per day, or less than $110 per month.

Training is Crucial John Tooley, senior building science specialist with Advanced Energy in Raleigh, North Carolina, helped TEP develop its Guarantee program and conducts training sessions for the builders who work with TEP. TEP hires Tooley to give quarterly training seminars. In early December, he gave four such seminars in Tucson to builders and architects, subcontractors, high school students interested in the construction trades, and real estate agents. The home is a system, Tooley emphasizes over and over again to his seminar students. His presentations are straight talk with plenty of illustrations and examples-soot in three-year-old homes, fire damage from backdrafting. As our homes have tightened up, he says, most home designers and builders have completely overlooked proper pressure balancing. In fact one well-intentioned manufacturer of natural gas hot water heaters responded to builder complaints that the pilot light was blowing out by replacing it with pilotless electronic ignition.  One of Tooley's slides shows a bathroom with faulty design no one could possibly miss. But in that same house, he told the class, you can walk by a water heater next to a clothes dryer in an enclosed space, or an unvented gas range or fireplace, and be oblivious to any danger. No one ever died from the bathroom door being too close to a plumbing fixture, but backdrafting can kill. For professional contractors, Tooley teaches the techniques for pressure balancing that are part of the TEP construction package. The goal of the improved construction techniques is to keep the house airtight while at the same time controlling air intake with the fresh-air ventilation system.

Figure 1. Estimate of the annual energy use for a 1,450 ft2 home, based on Elite Software simulations. These figures are divided by 365 days to derive the guarantee amount.

Inspectors check for gaps in insulation in all TEP Guarantee homes.

Blower door tests are done on all TEP Guarantee homes to verify house tightness.

TEP Guarantee Home Builders Michael G. Almli Construction Company Authentic West Barnett Building & Development C&C Construction Desert West Construction Douchette Homes Incorporated First Integrity Development Golden Star Properties Habitat for Humanity J. Nickolas Company The Kemmerly Company Lockridge Homes Lou Marson & Sons Mackley Brothers Constructors McCreary Homes Incorporated  Milestone Homes Miramonte Homes Peyton Taylor Homes  Primavera Builders Rocking M Building & Development SJF Development Tara-Sun Corporation Willmeng Homes Incorporated

For more than a decade, builders like Chicago's Perry Bigelow have launched similar programs that offer utility cost guarantees as a way of emphasizing their high-quality, energy-efficient construction (see Perry Bigelow: Energy Efficiency Maestro, HE Mar/Apr '94, p. 13). Other utilities have also promoted similar programs to work with builders toward more energy-efficient housing (see Trade Allies: Long Haul Partners, HE Sept/Oct '93, p. 17 and New Construction in New England: The Energy Crafted Home Program, HE Sept/Oct '92, p. 21). TEP, however, says it is the first electric utility to take up this marketing tool. There are others in the country that guarantee a dollar amount in energy savings, says contractor trainer John Tooley, but Tucson Electric Power's Heating, Cooling, and Comfort Guarantee program is unique.

TEP is betting that the owners of its Guaranteed homes will remain TEP customers even after other electricity providers enter the market. With deregulation set to begin in Arizona this year, this step is just around the corner. The benefits are large compared to TEP's expenses. With 29 Guaranteed homes built and another 36 under construction, 11 have completed their first year under the program. Of those 11, only 2 homes exceeded their Guaranteed amounts, says Wendy Erica Werden, the utility's marketing communication coordinator. For these two homes, TEP has had to pay a grand total of just $115.10 in energy cost rebates. In addition, the utility does pay some other costs: $600-$700 per home for the performance testing, plus another $100 in advertising.

Under the program, TEP does not guarantee the heating and cooling costs per day, but rather the average heating and cooling costs per day over the year. That is, a house could use more than the guaranteed amount in one day, but it's average use for the year would not be above that amount. TEP uses Elite software for sizing equipment, based on the American Society of Heating Refrigeration & Air Conditioning Engineers (ASHRAE) Comfort Chart, to estimate each home's monthly electricity use expressed as a dollar-per-day figure. For example, one 1,450 ft2 home built to TEP's standards carries a guaranteed maximum HVAC operating cost of $1.19 per day, less than $40 per month (see Tables 1 and 2).

To establish baselines for non-HVAC-related energy uses within the home, TEP looks to Tucson's benign months of April and November, when heating and cooling needs are minor to nonexistent. The logical assumption is that bills in those months reflect the owners' baseline electric consumption for appliances such as refrigerators, dishwashers, and dryers; pool pumps and equipment; computers; lighting; and other uses. The billing differential between baseline months and heating and cooling months is thus the HVAC operation energy cost (see Figure 1). TEP calculates these costs annually but suggests homeowners take advantage of its budget billing program, which averages utility costs into a monthly payment plan. If the electric bill is higher than estimated, TEP refunds the difference at the end of the year.

Werden says that production and custom builders are not the only builders involved in the program. Primavera and Habitat for Humanity, programs that help the working poor build and own housing, also participate. Their 1,200 ft2 homes sell for $50,000 and guarantee heating and cooling cost averaging no more than 81¢ per day.

Other differences in TEP's program are the care taken to size equipment properly; air balancing and pressure balancing with additional air returns inside the home; and mechanical ventilation systems to introduce healthy amounts of fresh air without wasting energy. These measures create more uniform temperatures throughout the home; prevent backdrafting when water heaters, fireplaces, or vent fans are in use; reduce air infiltration; and keep indoor air fresh and healthfull.

Careless construction techniques often create situations in which energy efficient materials perform little better than their inefficient counterparts. Therefore, TEP's program calls for and checks framing improvements, such as wall blocking, so that poor construction doesn't undermine energy-saving measures. TEP inspectors check all the following areas to ensure that appropriate blocking or capping is present: rim joists, floor system, cantilevers, flues and chimneys, cavities and chases, soffits connected to exterior walls, dropped ceilings, garage attic connections to conditioned space, parapet walls, furred walls, split-level wall connections, beam pockets, wiring and plumbing penetrations, and stairwells.

Insulation inspections verify that the entire cavity is properly insulated with no voids or compression, and that the insulation is split around wires and plumbing. TEP inspects to make sure that all ponywalls, kneewalls, stairwells, skylight shafts, and so on are properly insulated, and that insulation is secured in place (no friction batt unless it is properly secured). The inspectors also verify that the insulation in all areas touches the appropriate air barrier.

Requirements for insulation are R-30 for ceilings and R-19 for walls, but this can vary if the standards are based on performance. Insulation may be either blown in or blanket cellulose or a combination of R-13 batts and R-4 rigid foam board. Crawlspaces or basements (which are uncommon in Tucson) must have R-7 insulation, and the floors over these unconditioned spaces must have R-19 insulation. Concrete slabs must have perimeter insulation. Although these insulation standards aren't necessarily higher than those of other programs, the attention paid to construction details that affect thermal performance results in a more efficient home, the utility says.

Under the prescriptive method, the windows can comprise a maximum of 15% of the conditioned floor area. The program also requires energy-efficient, double-glazed, NFRC-rated windows that are thoroughly caulked and sealed with nonexpandable foam; well-sealed sill plates and exterior-wall utility outlets; the use of mastic to seal R-6 insulated ductwork; a 12 SEER air conditioner; and a 7.8-8 HSPF heat pump.

The water heater must also be electric. The utility feels that insisting on electric water heaters is easier than requiring builders to build a sealed combustion, power-vented compartment for a gas water heater, and it feels that the higher cost of electric water heaters is greatly offset by the other energy efficiency measures in the homes. It also offers a special rate to customers to offset the costs. Buyers may choose gas cooking equipment and fireplaces if they wish. If buyers choose to have a fireplace, whether wood-burning or gas, it must draw outside makeup air for combustion. In addition, qualifying houses must conform to certain thermal performance standards (see Table 4). Furnaces must also be high efficiency electric heat pumps. It is fair to point out that these features of the program are likely to draw attention to the utility's particular interest in promoting electric appliances.

There are three required TEP inspections: two during construction and one to verify equipment installation. Along with the requirement that duct leakage not exceed 3% of the house floor area is a requirement that connections be sealed with mastic sealant and that the returns be ducted. Inspectors also locate ducted return air paths from all major rooms and locate the fresh-air ventilation system to verify installation. Air balancing is used to ensure proper air flow to every room, HVAC equipment is sized appropriately, and ventilation is controlled to ensure that enough fresh air enters the well-sealed home. All these are noteworthy examples of how the TEP Guarantee program exceeds the national Good Cents program.

Every single home in TEP's program receives a detailed inspection upon completion, including a blower door test, duct testing, diagnostic work, and an air-flow test. The homes must pass inspection before they can receive the TEP Guarantee.

Even what looks clean in a home isn't always so. A 1996 study by a manufacturer of home ventilation products found that air analysis of new, clean-looking homes turned up formaldehyde, VOCs, carbon monoxide, nitrogen dioxide, and sulfur compounds, as well as pet dander and dust.

Moisture can also be a problem. The American Lung Association says that a family of four can generate 1 cup of moisture per hour just from breathing and perspiring. Add moisture from bathing, cooking, and cleaning, and a family of four will generate more than 18 gallons of water per week, creating mold, mildew, and a haven for dust mites if the relative humidity becomes high enough.

The solution to moisture and IAQ problems is a whole-house mechanical ventilation system that exhausts stale air and brings in fresh air without wasting energy dollars. The Heating, Cooling & Comfort Guarantee homes require these systems. TEP does not advocate any particular system--as long as each home passes the final diagnostics tests, the utility isn't concerned with which system the HVAC contractor chooses.

The basic 201 pricing plan (Option A) saves a typical customer 12% over the standard electrical rate, but two further options can save still more. Option B is a time-of-use (TOU) plan that lowers rates at night and other off peak times (customers do not pay for the TOU meter). This saves up to 18% over the standard. Option C throws in solar or heat pump water heating (or both), saving the customer up to 22% more than the standard.

Some local lenders recognize that lower energy bills mean lower cost of homeownership, and are promoting the energy-efficient mortgages (EEMs) that qualify buyers for larger loans. For example, Commercial Federal Mortgage offers these mortgages plus a $200 discount on closing costs to the buyers of TEP Guarantee homes. Commercial will also qualify buyers for loans up to 5% higher than those they would otherwise get. Thus a buyer who qualified for a $150,000 loan on an ordinary home might qualify for a $157,500 loan on a Guarantee home. The lender also gives borrowers a 0.25% reduction in points and down payment options as low as 3%. This means that the buyer of a qualified $157,500 home needs a down payment of just $4,725. Since many consumers make enough money to make mortgage payments but don't have much in savings, such plans can open the door to homeownership.

By promoting this kind of plan and partnering with builders, TEP feels it can benefit in this era of increasing competition. And while the utility hopes to keep its competitive edge in the battle for customers, builders can benefit also--even in times of high construction activity. In the eyes of consumers, a program like the TEP Guarantee certifies not just energy savings but also construction quality. Moreover, such a program enables consumers to choose a home that may have a slightly higher selling price but offers dramatically lower operating costs.
 
 

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