In the 36 years since the California Standard Practice Manual (CaSPM) was first released, cost-effectiveness testing has spread across the country following the growth of utility customer-funded energy efficiency. The California tests have been adopted by utilities, consultants, regulatory commissions and legislators to determine whether an energy efficiency measure or program is worth pursuing and whether a completed program performed as expected. Fundamentally, a cost-effectiveness test measures the total benefits divided by the total costs, and passes if the ratio is greater than or equal to 1.0.
Cost-effectiveness testing is an important part of energy efficiency planning, reporting and evaluation. Utilities use cost-effectiveness tests to demonstrate that their investments in energy efficiency are in the best interests of the utility, their customers and society in general. The traditional tests come from a California Public Utility Commission manual that was developed in the early 1980s and last updated in 2001.