Attch38_IPCE0113_Comments_NatResrcDefnsCouncl.pdf

September 21, 2001
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington St.
Boise, ID 83702-5983
RE:COMMENTS OF THE NATURAL RESOURCES DEFENSE COUNCIL ON IDAHO POWER
COMPANY’S DSM APPLICATION (CASE NO. IPC-01-13)
Dear Commission Secretary,
Enclosed for filing are the Comments of the Natural Resources Defense Council on Idaho Power
Company's DSM Application (Case No. IPC-01-13).
Sincerely,
/s/ AVINASH KAR
Avinash Kar
Natural Resources Defense Council
Enclosures
NATURAL RESOURCES DEFENSE COUNCIL
Comments-
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San Francisco, CA 94105
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE INVESTIGATION )
OF INCREASED DEMAND-SIDE )CASE NO. IPC-01-13
MANAGEMENT PROGRAMS AND THE )
FUNDING FOR THOSE PROGRAMS FOR )
IDAHO POWER COMPANY )
)
COMMENTS OF THE NATURAL RESOURCES DEFENSE COUNCIL
The Natural Resources Defense Council (NRDC) respectfully submits these comments
on Idaho Power Company’s DSM Application pursuant to Idaho Public Utilities Commission
Order No. 28839. NRDC strongly supports the proposed tariff rider as a mechanism to
provide much needed stability for crucial energy efficiency program activities, and is encouraged
by the increase in energy efficiency investment and measures proposed by Idaho Power.
However, NRDC is concerned that the proposed funding level is too low to effectively
implement the valuable programs it proposes, and is well below commitments by other utilities in
the region. Because of the conflicting disincentive that current rate design provides to reduce
kWh use, NRDC urges the Commission to strongly consider modifying current rate design to
break the link between kWh sales and utility revenues to better align customer and utility
interests.
NRDC is a non-profit membership organization with a long-standing interest in
minimizing the societal costs of the reliable energy services that a healthy Idaho economy
requires. Our particular focus has been representing our Idaho members’ interest in the utility
industry’s delivery of cost-effective energy efficiency resources. NRDC generally supports the
comments of Idaho Rivers United, et. al., and our comments seek to compliment and
supplement, not duplicate their comments.
Comments-
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San Francisco, CA 94105
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Tariff Rider
The benefits of cost-effective energy efficiency investments have never been more
apparent – or more needed. Increased investment in energy efficiency is being witnessed in
many parts of the country, especially the Western U.S. While energy efficiency is an important
and cost-effective tool in dealing with energy supply problems and price spikes when they occur
(in fact, it is the quickest, cheapest, cleanest solution), these programs are also valuable in
preventing or hedging against these events. Continuity and stability of those investments are
crucial to their success. The Commission recognized this when they approved continued
investment by Idaho Power in the Northwest Energy Efficiency Alliance thru 2004. (Order No.
28333)
Approval of the proposed tariff rider by the Commission will provide continuity and
stability of funding for Idaho Power’s energy efficiency programs for two years as proposed.
NRDC strongly supports adoption of the proposed tariff rider as a mechanism for continued
funding of energy efficiency activities, but encourages the Commission to consider extending the
rider, with review, through at least 2004.
Energy Efficiency Program Funding and Measures
Idaho Power has proposed several energy efficiency measure options, most of which
have successful track records in achieving lasting, cost-effective energy savings. While there are
many additional program options Idaho Power could consider, NRDC is generally pleased with
the options presented. Idaho Power’s program options focus on cost-effective measures that
reduce overall and peak loads long term; they do not just shift the kWhs around, or provide for
one-time payments for one-time interruptions in service.1 Idaho Power proposes to form an
Energy Efficiency Advisory Group to assist them in refining and prioritizing measure options and
developing additional possibilities. NRDC is encouraged by and supports this proposal.
NRDC is also encouraged by Idaho Power’s intent to accurately measure and evaluate
programs, relying heavily on work already done by the Regional Technical Forum and the
Northwest Energy Efficiency

1 NRDC strongly supports Idaho Power’s statement that “…curtailment programs are not traditional
conservation programs, which stressed long-term efforts to “do more with less” through greater efficiency.”
(Idaho Power July 31, 2001 Compliance Filing, Appendix 2, p. 7)
Comments-
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Alliance. However, specific measurement and evaluation plans must be developed and in place
when Idaho Power adopts the measures for implementation.
NRDC has two primary concerns related to program funding and measure options.
First, while NRDC supports Idaho Power’s proposed measure options and plan to establish an
advisory committee, we are concerned that there appears to be no clear schedule proposed for
adopting specific measures for implementation. We urge the Commission to direct Idaho
Power to adopt an aggressive schedule to establish the measures to be implemented and the
measurement and evaluation plans to be used in their program portfolio.
Second, NRDC does not believe that the proposed funding level is adequate to fully
and effectively implement the valuable programs it proposes. Idaho Power itself notes that not
all the programs listed can be implemented with the assumed size and program design
presented. (Appendix 3, p. 1) In addition, other utilities in the region are funding energy
efficiency programs at well above the level proposed by Idaho Power. For example, Avista
Corporation’s Idaho investments in energy efficiency and low-income weatherization programs
are 1.95% of their total revenues. This investment level does not include low-income bill
assistance or “green” energy.
One crucial point not included in the discussion on impacts of the rider is that successful
energy efficiency activities produce bill reductions. While Idaho Power points out that the tariff
rider will add approximately $0.28 to the average residential customer bill, they overlook the
fact that by doing very little, customers can reduce their bills by magnitudes more than that small
amount. For example, if a typical residential customer replaced just one of their incandescent
bulbs with one compact fluorescent bulb, they would save approximately $0.56 per month.2
NRDC urges the Commission to direct Idaho Power to increase its investment levels to be
comparable to those of Avista. This will provide more equitable levels of assistance and
benefits to energy customers across Idaho.
Proposed Ratemaking Modifications
By its very nature, ratemaking regulation rewards some behavior and deters others.
Utilities should be rewarded based on how well they meet their customers’ energy service
needs. Most current rate design does not do this, and instead places the focus on commodity

2 This is a rough calculation based on estimates provided in Idaho Power’s program descriptions. Their
assumption is that a CFL saves on average 135 kWh per year. The $0.56 per month assumes an energy cost
of $0.05. If you assume $0.04, then the savings drop to $0.45 per month – still well above the $0.28 cost per
month for the entire program portfolio, resulting from just one program measure.
Comments-
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San Francisco, CA 94105
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sales. This system of price cap regulation discourages even the most economical investments if
they are likely to reduce throughput. Under this system, capacity expansion is the primary
response to projected load growth to the exclusion of investments in energy efficiency and other
distributed energy resources. From the utilities’ perspective, demand- or supply-side resources
installed on the customer side of the meter produce the same effect – sales go down and as a
result, revenues and profits go down. This is economically inefficient because the utility does not
have the incentive to choose the least-cost option to provide energy service to its customers.
Breaking the link between kWh sales and revenues (decoupling, revenue indexing,
revenue-per-customer, etc.) refocuses utilities on making least-cost investments to deliver
reliable energy services to customers even when such investments reduce throughput. It
removes both the incentive to increase electricity sales and the disincentive to run effective
energy efficiency programs or invest in other activities that may reduce load. Decoupling better
aligns shareholder and customer interests to provide for more economically efficient resource
decisions. While breaking this link removes the disincentive to invest in energy efficiency,
additional incentives or mechanisms such as a system benefits charge or performance-based
incentives may be necessary to promote active investment in publicly beneficial levels of energy
efficiency and renewable resources.
Decoupling has many benefits in addition to those discussed above. It removes the
incentive to game forecasts of electricity sales which causes so much contention in rate case
proceedings. It permits innovative ratemaking. Experimental ratemaking faces less resistance
from the utilities than it would in the absence of decoupling. And it also contributes to regulatory
efficiency. It has been argued that this benefit of decoupling has improved the efficiency of the
regulatory process by minimizing ratemaking disputes.
NRDC urges the Commission to initiate a proceeding to consider modification of
current rate design to break the link between kWh sales and utility revenues to encourage
investments in clean and affordable energy.
Conclusion
NRDC respectfully urges the Commission to:
· Adopt the proposed tariff rider as a mechanism for continued funding of energy
efficiency activities, and extend the rider, with review, through at least 2004;
· Direct Idaho Power to adopt an aggressive schedule to establish the measures to be
Comments-
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San Francisco, CA 94105
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implemented and the accompanying measurement and evaluation plans to be used in
their program portfolio;
· Direct Idaho Power to increase its investment levels to be comparable to those of
Avista;
· Initiate a proceeding to consider modification of current rate design to break the link
between kWh sales and utility revenues to encourage investments in clean and
affordable energy.
Dated: September 19, 2001
Respectfully submitted,
/s/ SHERYL CARTER_
Sheryl Carter
Senior Policy Analyst
Natural Resources Defense Council
71 Stevenson St., Suite 1825
San Francisco, CA 94105
415 777-0220
[e-mail]
CERTIFICATE OF SERVICE
I hereby certify that on this 19th day of September 2001, true and correct copies of the
foregoing Comments of the Natural Resources Defense Council were delivered to the
following persons via Federal Express:
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington St.
Boise, ID 83702-5983
Comments-
71 Stevenson Street, Suite 1825 NEW YORK × WASHINGTON, DC × LOS ANGELES
San Francisco, CA 94105
TEL [phone] FAX [phone]
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Larry Ripley, Senior Attorney
Betsy Galtney, Regulatory Affairs Representative
Idaho Power Company
1221 W. Idaho St.
Boise, ID 83702
/s/ AVINASH KAR______
Avinash Kar
Natural Resources Defense Council
71 Stevenson Street, Suite 1825
San Francisco, CA 94105
[phone]