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r , January 13, 2004 Board Meeting 9-1 Page 2 Evaluation of Pilot Program With the assistance of a qualitative research firm, staff evaluated the Pilot Program's strengths and weaknesses. Four focus groups with member agencies and program participants were formed. Additionally, businesses that expressed interest but did not participate in the program were interviewed. Lastly, water agencies outside of Metropolitan's service area were interviewed to gain insight on how other CII programs operate. The focus groups indicated high customer and member agency satisfaction from Pilot Program participants. All of the focus groups supported the one-stop-shop concept, where businesses can call a toll-free number to obtain program information, applications, and rebates, because it makes participation simple and easy. Focus groups also supported the Pilot Program's flexibility, which allows member agencies to customize and include additional rebate funding within their service areas. Proposed Program Staff worked with the member agencies to design a long-term program that sustains achievements and momentum generated by the Pilot Program and incorporates findings provided by the focus groups. Recommended concepts to be incorporated into a new scope of work include expansion of web-based services, participant recognition through awards or public acknowledgment, and targeted program marketing. Attachment 1 provides a description of the proposed long-term program. The Pilot Program received outside grant funding to increase the rebates for a few conservation measures. When the outside grant funding was exhausted, the Board approved continuing the higher rebate amounts with funding above the $154/ AF savings benchmark. These higher rebates were initiated to jump-start the Cll market and to test rebate levels and customer participation. The long-term program will return to rebates based on $J54/AF savings and focus on program design to sustain and enhance customer response. A comparison of rebates provided under the Pilot Program and those proposed for the long-term program is provided in Attachment 2. These incentives are also available for member agencies which choose to implement their own program. Future agreements with member agencies that participate in the Pilot Program will be modeled after our new master conservation agreements. The new agreement will provide longer terms, flexibility to add and delete eligible device retrofits and support improved administrative efficiency. Vendor Services A RFP would be issued for program management for a period of five years. Staff will bring back the proposed consultant services contract terms to the Board for consideration. Like the Pilot Program, the long-term Cll program will select a vendor through a competitive RFP process to implement the new long-term program. The vendor will market and manage the program. The vendor will also manage and coordinate all rebates, which include funding from Metropolitan, member and retail agencies, and grants. Metropolitan will pay to the vendor the total rebate amount plus its service fees. Service fees would be paid out of Metropolitan's Operation and Maintenance budget. Metropolitan's rebates would be paid out ofa Conservation Credits budget. Metropolitan would then recover payments from member agencies and grant-providing agencies for their share of the incentive. The service fees, which total approximately $750,000 since inception of the Pilot Program, are 12 percent of the program's overall expenditures. Focus group members emphasized the importance of a long-term commitment to lend stability and credibility to the program. To ensure that there is no interruption in customer service, staff recommends a six-month extension of the current Honeywell vendor agreement through December 2004 or until a new agreement is executed, whichever is earlier. This extension is estimated to cost about $2.5 million and will span the time needed to accommodate issuance of the RFP, proposal evaluation, vendor selection, board approval, and contract execution without interrupting the current interest and participation of the business community. The extension would raise the contract total to $10.4 million. Approximately 12 percent of the increased cost would be for vendor services to administer and market the program, and the remainder would be a pass-through of Metropolitan's incentives to the customer.