DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

                         PUBLIC SERVICE COMMISSION

                RESIDENTIAL CONSERVATION PROGRAM STANDARDS


(By authority conferred on the public service commission by  section  6c   of 
Act No. 3 of the Public Acts of 1939, as amended,  being   S460.6c   of   the 
Michigan Compiled Laws)


R  460.2401   Definitions.
  Rule 1. As used in these rules:
  (a) "Act" means Act No. 3 of the Public Acts of 1939, as amended,  being  S 
460.1 et seq. of the Michigan Compiled Laws.
  (b) "Commission" means the public service commission.
  (c) "Current" means that a customer has complied  with  appropriate  tariff 
provisions of the public utility governing the payment of  bills  and   these 
rules, and, in addition, means and includes residential  customers  who  have 
entered and are up to date on budget payment or equal  payment   plans,   and 
customers who offer to enter or who have entered and   are   complying   with 
settlement agreements as provided by the  commission's   Consumer   Standards 
and Billing Practices, Electrical and Gas  Residential   Service,   being   R 
460.2101 et seq. of the Michigan Administrative Code.
  (d) "Energy conservation program" means a program  by   which   residential 
conservation measures are made available  to  some  or  all   of   a   public 
utility's residential customers.
  (e) "Multiple-family dwelling" means and includes such living facilities as 
 cooperatives,   condominiums,   and   apartments,   provided    that    each 
household within the dwelling has normal household facilities,  such   as   a 
bathroom,  individual  cooking,  and  a   kitchen   sink.    "Multiple-family 
dwelling" does not include such living facilities as  penal   or   corrective 
institutions, motels, hotels, dormitories, nursing  homes,   tourist   homes, 
military barracks,  hospitals,  special  care  facilities,   or   any   other 
facilities primarily associated with the purchase, sale,  or  supplying,  for 
profit or otherwise, of a commodity,  product,  or  service   by   a   public 
person, entity, organization, or institution.
  (f) "Public utility" means a company furnishing gas  or   electricity   for 
public use at rates approved or prescribed by the commission.
  (g) "Residential  conservation  measures"   means   conservation   devices, 
services,  and  materials,  including,  but  not   limited    to,    caulking 
weatherstripping; modification or adjustment  of  furnaces   and   flues   to 
improve their efficiency; furnace  ignition   systems;   clock   thermostats; 
ceiling, attic, wall, floor, and water heater   insulation;   storm   windows 
and   doors;   multiglazed   windows   and    doors,    heat-absorbing     or 
heat-reflective  glazed  windows  and  door  materials;   and,   where   cost 
effective as a means  of  reducing  demand  for  energy   supplied   by   the 
utility, devices to utilize solar, wind, or thermal  energy,   installed   or 
furnished on the residential premises or a   public   utility's   residential 
customers.
  (h) "Residential customer" means a person who receives  gas   or   electric 
service from a public utility for residential use by that person or others in 
 a  single-family  dwelling,   individual   flat   or   apartment,    or    a 
multiple-family dwelling.

  History: 1979 AC.


R  460.2402   Application for approval of energy conservation program.
  Rule 2. A public utility may apply to the commission  for  authorization of 
an energy conservation program. In respect to  each  such  application, there 
shall be an opportunity for a contested case hearing upon  reasonable  notice 
as provided  in  rate  cases  before  the  commission.  In  respect  to  each 
application filed after the effective date of these rules, there shall  be  a 
public hearing held in the service territory of the public  utility  for  the 
purpose  of   obtaining   public   comment   on   the   energy   conservation 
program.  Interested  parties  may  participate  in   accordance   with   the 
commission's  rules  entitled   "Practice   and    Procedure    Before    the 
Commission," being R 460.11 et seq. of the  Michigan   Administrative   Code, 
and Act No. 306 of the Public Acts of 1969, as amended, being  S  24.201   et 
seq. of  the  Michigan  Compiled  Laws.  The   commission's    staff    shall 
participate in each such proceeding.

  History: 1979 AC.


R  460.2403   Proposing inclusion of   different   residential   conservation 
measures in program; order; jurisdiction.
  Rule 3. Any interested person may propose or oppose the  inclusion  in   an 
energy conservation program of residential  conservation  measures  different 
from, or in addition to, those proposed by the  public   utility.   Following 
the entry of an order authorizing  an  energy   conservation   program,   the 
commission shall retain jurisdiction to consider the inclusion  in   such   a 
program  of  residential  conservation  measures  different   from,   or   in 
addition to, those included in the program  as   approved.   Any   interested 
person may petition for  the  exercise  of  such   jurisdiction   or   oppose 
inclusion of such measures in an energy conservation program.

  History: 1979 AC.


R  460.2404   Determination of residential  conservation   measures   to   be 
included in energy conservation program.
  Rule 4. The commission shall determine   which   residential   conservation 
measures  shall  be  included  in  an  energy   conservation   program.   The 
commission shall consider residential conservation measures  proposed  to  be 
included in an energy conservation program on the basis  of  their  potential 
for  conserving  gas   or   electricity;    safety;    cost    effectiveness; 
reliability; and applicability to the residential premises  of   the   public 
utility's residential customers. The proponent of  the   inclusion   of   any 
residential conservation measure in an energy  conservation   program   shall 
have the burden of proving the extent to which the safety thereof has been or 
 will  be  determined   by   public    agencies    with    jurisdiction    or 
responsibility in respect to  safety  or  by   private   organizations   with 
recognized competence in respect to safety.  Where  the   cost   benefit   of 
residential  conservation  measures  which    qualify    for    interest-free 
financing pursuant to R 460.2409 of these rules   varies   significantly   by 
type, brand, or make of residential  conservation  measure,   more   than   1 
type, brand, or make of conservation measure may be included  in  an   energy 
conservation program, but the variation in cost benefit  among   the   types, 
brands, or makes of residential conservation measures shall  be  disclosed to 
the customer as part of the information requirements of  R 460.2406  of these 
rules. A public utility or a subsidiary of  a   public   utility   shall  not 
manufacture or obtain  profit  from  the   manufacture   of   a   residential 
conservation measure used  in  an  energy   conservation   program   approved 
pursuant to these rules.

  History: 1979 AC.


R  460.2405   Including costs in general utility rates.
  Rule 5. Upon commission authorization, a public utility  may   include   in 
its general rates for  utility  service  the  costs  of   money,   bad   debt 
expense, administrative costs and all or part of the  cost   of   residential 
energy audits associated with an energy conservation  program.   Such   costs 
shall be recovered by a charge included equally  in  the   price   of   every 
metered  unit  of  gas  or  electricity   sold    subject    to    commission 
jurisdiction, without regard to the amount of gas or electricity  consumed by 
a customer. The inclusion of such costs in general utility rates   shall  not 
continue after the  costs  arising  from  an  approved  energy   conservation 
program have been recovered. The commission shall authorize the charges to be 
included equally in the  price   of   gas   or   electricity   and   periodic 
changes thereto in proceedings limited to determining the   amount   of   the 
costs of  the  energy  conservation  program  which  were  or   are   to   be 
reasonably and prudently incurred by the public utility and which  are  to be 
recovered through such charges and the  level  of  the  charge  necessary  to 
recover such costs.

  History: 1979 AC.


R  460.2406   Providing cost benefit information to customer.
  Rule 6. Each  residential  customer  to   whom   residential   conservation 
measures are offered or furnished under  an   energy   conservation   program 
shall be provided with cost benefit information  regarding  such  residential 
conservation measures as they  apply  to  the   customer's   residence.   The 
standards and methodology used to provide this cost benefit information or to 
provide cost benefit information under any program authorized by  these rules 
shall be authorized by  the  commission.  Due  to  the   fact   that   no   2 
dwellings have exactly the same potential  for   energy   conservation   even 
where dwellings have  been  constructed  in  a   similar   fashion,   because 
physical location, habits of occupants, and structural  integrity  differ, it 
may be necessary to render an estimate  of  energy  savings  for  a  specific 
residence on the basis of energy conservation efficiency to  be  expected, on 
the average, from installation of specific energy conservation measures  in   
residences   with   characteristics   similar   to   the   residence    under 
consideration.  If  an  estimate   of    energy    conservation    efficiency 
incorporates any averages, that fact shall be  clearly   disclosed   to   the 
residential  customer.  If  such  cost  benefit   information   pertains   to 
residential conservation measures  to  be  installed   by   contractors,   as 
referred to in R 460.2408, the residential conservation  customer  shall   be 
informed as to whether costs are based on an actual contractor  bid  for  the 
customer's premises or an estimate thereof.

  History: 1979 AC.


R  460.2407   Installation of conservation devices and materials.
  Rule 7. Conservation devices and materials  installed   under   an   energy 
conservation program,  unless  personally  installed   by   the   residential 
customer,  shall  be  installed  by  a  contractor  holding   both   of   the 
following:
  (a) A valid residential builder's license or  a   residential   maintenance 
and alteration contractor's license issued by the  Michigan   department   of 
licensing and regulation under Act No. 383 of the Public Acts  of  1965,   as 
amended, being S383.1501 et seq. of the Michigan Compiled Laws.
  (b)  Other  contractors'  licenses  required  by   applicable   local    or 
municipal codes or reciprocal licensing provisions.

  History: 1979 AC.


R  460.2408   List of contractors; availability;   grouping   of   customers' 
premises.
  Rule 8. (1) As part  of  an  energy  conservation   program,   the   public 
utility shall prepare, or cause to be prepared, for  its   service   area   a 
list or lists of contractors who do all of the following:
  (a) Hold the required licenses.
  (b) Maintain coverage as prescribed by law in respect to insurance.
  (c) Enter into a contract in a form authorized by  the   commission   which 
contains, among other things,  a  full  warranty  of   work   performed   and 
materials furnished.
  (2) A list of qualified contractors for the appropriate   area   shall   be 
made available to each residential customer who decides to  have  devices  or 
materials installed under the energy conservation  program.   A   residential 
customer selecting contractors who  are  not  on  the   list   described   in 
subrule (1) may obtain the benefits of residential  conservation  programs as 
described in R 460.2409 and R 460.2410, if such  contractors  demonstrate  to 
the public utility compliance with  subdivisions  (a),  (b),   and   (c)   of 
subrule (1).
  (3) If the residential customer makes no selection of  a  contractor,  that 
customer's premises, with the consent of the customer, may  be  grouped  with 
other customers' premises in  the  same  area,  and   the   installation   of 
devices and materials for the group  shall  be  performed   by   the   lowest 
qualified bidder. Groupings of premises pursuant to this rule shall be  in  a 
number to achieve  economies  of   scale   without   unduly   impairing   the 
ability of private contractors to bid for such work. Where possible,  bids to 
determine the average cost of  performing   such   work   for   a   residence 
typical of residences within a specific geographical area  shall   be   taken 
prior  to  offering  residential  conservation   measures   to    residential 
customers so as to give such customers a basis for   price   comparison   and 
cost effectiveness. Applications for bids issued to contractors  for  work to 
be performed pursuant to this  subrule  shall  include  criteria   for   wage 
levels and other conditions which will ensure that   the   largest   possible 
percentage of local contractors has an opportunity   to   bid   competitively 
for work performed pursuant to this subrule.

  History: 1979 AC.


R  460.2409   Payment for residential  conservation   measures   that   repay 
costs of installation; contracts.
  Rule  9.  (1)  Residential  conservation   measures,   as   defined   in  R 
460.2401(g) above, or as included  in  an  authorized   energy   conservation 
program pursuant to  R 460.2403  above,  that  will  repay   the   costs   of 
installation (costs of installation are those costs determined to  prevail on 
or around the filing date of an energy conservation program)  within  7 years 
or less from energy savings (calculated using energy costs in effect  at  the 
filing date of the energy  conservation  program),  and  which  are installed 
as part of an authorized energy conservation program,   shall   be  paid  for 
under contracts  that  do  not  charge  interest  to   residential  customers 
contracting for such measures. Audits,  inspections,  and  other verification 
of the applicability of only those  residential  conservation measures  which 
repay the costs of installation within 7 years or less from energy savings to 
a customer's residence may  be  included  in  an  energy conservation program 
and, if  so  included,  shall  be  performed  by  the utility  at  no  direct 
charge to the  customer.  Charges  for  all  other  audits,  inspections,  or 
verifications shall be as authorized by the commission.
  (2) No penalty shall be imposed by the lender for payment of  all  or   any 
portion of the outstanding balance due on any contract prior  to   the   date 
such payment would otherwise be due.

  History: 1979 AC.


R  460.2410   Financing of residential conservation measures.
  Rule 10. (1) A utility may refer its customer to a financial institution in 
 the  business  of  lending   for   financing   of   the   installation    of 
residential conservation measures in lieu of providing funds directly  to, or 
on behalf of, the customer.
  (2) As part of an authorized energy conservation   program,   the   utility 
may contract to collect payments for conservation measures at   no   fee   to 
the financial institution, absorb bad debt  expenses,   and   subsidize   the 
loan in an amount up to the  difference  between  the   interest   rate,   as 
listed in R 460.2409, and the lower of the interest rate,  including  use  of 
deferred taxes, that the utility would have  to  pay  for   capital   at   or 
around the time of the filing of the energy conservation   program,   or   an 
interest rate which is negotiated between the utility   and   the   financial 
institution.  However,  residential  customers  may  not   be   charged   any 
additional fee or interest charge by the financial  institution   under   the 
loan contract provided for in this provision.

  History: 1979 AC.


R  460.2411   Including costs of money and cost of  bad   debt   expense   in 
general utility rates.
  Rule 11. Notwithstanding any other provision of these   rules,   costs   of 
money and costs of bad  debt  expense  related  to   an   authorized   energy 
conservation program may be included in general utility rates as  provided in 
R 460.2405, if  the   commission   finds   that   the   energy   conservation 
program is apt to result, in the foreseeable future, in   lower   rates   for 
all  utility  ratepayers  than  could  be  achieved   without   the    energy 
conservation program.

  History: 1979 AC.


R  460.2412   Eligibility to receive loans; securing  contract  by   security 
interest.
  Rule 12. (1) All residential customers who are owners of  the  residence in 
which they live and who are current in their payment of   utility   bills  of 
the utility company offering the loan are eligible to receive loans.
  (2) All tenants who are residential customers and  who   are   current   in 
their payment of the utility bills of the  utility   company   offering   the 
loan, and  who  secure  permission  to   install   residential   conservation 
measures from their landlords, as well as an agreement  that   the   landlord 
will inform subsequent tenants of any such  tenant's   obligation   to   make 
payments on an energy  conservation  program  contract,   are   eligible   to 
receive loans.
  (3) Contracts pursuant to an energy conservation program may be  secured by 
a statement of lien or other security interest.

  History: 1979 AC.


R  460.2413   Informing   solicited   customers    of     availability     of 
conservation measures pursuant to state and federal programs.
  Rule 13. All utilities implementing energy  conservation   programs   shall 
inform those of their customers who are  solicited  to   participate   in   a 
utility conservation program of conservation measures  that   are   available 
pursuant  to  state  or  federal  programs  which  are   applicable   to    a 
significant proportion of  the  customers  of  the   public   utility.   This 
information shall be provided to utility customers  before   such   customers 
agree to participate in a conservation program authorized by the act.

  History: 1979 AC.


R  460.2414   Construction of rules.
  Rule 14. Nothing contained in these rules shall be construed to prohibit or 
modify gas or electric utility conservation programs in  effect  before  June 
5, 1978, without prior notice and hearing before the commission.

  History: 1979 AC.