Attch47_IPCE0113_FinalO.N.28894.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

in the matter of THE INVESTIGATION
OF INCREASED DEMAND-SIDE
MANAGEMENT PROGRAMS AND THE
FUNDING OF THOSE PROGRAMS FOR
IDAHO POWER COMPANY. )
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CASE NO. IPC-E-01-13

ORDER NO. 28894

In Order No. 28722 issued May 1, 2001, the Commission directed Idaho Power Company to file a comprehensive demand-side management (DSM) plan. DSM is a term commonly used to describe various measures that conserve energy, reduce demand peaks, and/or increase the efficient use of electricity. The Order required the Company to file a “comprehensive DSM program by August 1, 2001 that details program structure, potential conservation measures to pursue and funding options that include a tariff rider.” Order No. 28722 at 21. On July 31, 2001, Idaho Power submitted its DSM application. Interested parties filed comments on or before September 20, 2001 and Idaho Power submitted reply comments on October 12, 2001. In this Order, the Commission: 1) directs implementation of limited DSM programs for this winter heating season; 2) orders the organization of an Idaho Power DSM Advisory Group; and 3) postpones consideration of a DSM surcharge until the Company’s Power Cost Adjustment (PCA) application is filed next spring.
IDAHO POWER’S DSM COMPLIANCE FILING
On July 31, 2001, Idaho Power submitted a DSM Compliance Filing (Filing) as required by Order No. 28722. The Filing lists potential conservation measures initially reviewed by the Company. Filing at 4.
1. Proposed DSM Programs
For residential customers, these measures include compact fluorescent (CFL) bulb coupons, Energy Star appliance incentives, high efficiency air conditioner/heat pump rebates, weatherization loan buy-down program, duct sealing, new construction market pull efforts and low-income assistance enhancements. In the commercial and industrial sectors, Idaho Power reviewed Vending Miser technology, commercial CFL bulb coupons, reduced air movement incentives, LED traffic lighting incentives, BacGen incentives, building tune-up programs, lighting acceleration programs, small retrofit programs and projects customized to individual customers. For irrigation customers, Idaho Power has considered existing system modifications and new system improvements. Estimated total resource costs for these programs range from 0.6 cents/kWh to 4.9 cents/kWh.
2. DSM Revenue Recovery
Idaho Power believes a tariff rider that provides for the recovery of expenses on an ongoing basis is the appropriate mechanism for program funding because it provides energy efficiency continuity while eliminating budgeting concerns and regulatory risk. Id. at 6. The Company proposed a two-year rider that would generate approximately $2.6 million in annual revenue, which would result in a 0.5% surcharge of operating revenues. Id. at 8. If approved, the rider would increase the average residential monthly bill by approximately $0.28. Moreover, it would increase the Company’s total efficiency spending as a percentage of revenue close to 1.0%, as compared to the Northwest investor-owned utility average of 0.7% and Avista Corporation’s recently approved 1.95%. Id. at 7 and 9. The Company states that this funding would match all anticipated program costs including education, incentives, administration, research and evaluation. Id. at 8.
3. Energy Efficiency Advisory Group
In conjunction with the implementation of the tariff rider and its comprehensive Energy Efficiency Program, the Company recommends the creation of an “Energy Efficiency Advisory Group.” The primary purpose of this group would be to advise the Company on new measure recommendations, existing measure revisions, measure prioritization, and evaluation. This advisory group would be made of community members eligible for the rider’s services, Commission Staff, Company employees and technology specialists. Idaho Power states although the advisory group will provide recommendations, the Company will make all final decisions on energy efficiency programs. Id. at 11.
COMMENTS
In Order No. 28839, the Commission solicited public comments on Idaho Power’s DSM compliance filing. As of October 15, 2001, 25 private citizens submitted comments in this case. While five of these commentors were opposed to a 0.5% rider increase, 9 of the 20 individuals who favored implementation of DSM programs commented that this funding level was too low and should be increased from 1.5% to 3% over a three-year period. The Commission also received filings from interested organizations, Commission Staff and reply comments from Idaho Power. These comments are briefly summarized as follows:
1. Micron Technology
Micron opposes disproportionate reliance on conservation programs that seek primarily long-term “market transformation” and supports greater emphasis on immediate or short-term conservation measures. Micron asserts that the Northwest Energy Efficiency Alliance (NEEA) cannot identify any savings for over half of its projects. Micron believes Idaho Power’s current funding for NEEA DSM projects should be immediately curtailed and redirected to operate Idaho-based conservation efforts. Moreover, Idaho Power should implement supply-side conservation measures that improve the efficiency of the transmission system. Micron supports the Company’s proposal to create separate accounts for large customers from which self-directed conservation programs can be funded. However, if self-directed programs are implemented, the governing approval procedures must be efficient and require the Company to approve or reject a conservation proposal within 30 days. Finally, Micron agrees with Idaho Power that expenses should be recovered on an ongoing basis.
2. Industrial Customers of Idaho Power
The ICIP generally supports Idaho Power’s compliance filing with several modifications. First, Idaho Power’s fund (and in turn NEEA projects) should focus on short-term conservation acquisition rather than long-term market transformation. “Self-funding” custom industrial conservation program proposals should be deemed “approved” if the Company does not respond within 30 days after submission. When implementing the actual budgets allocated to industrial and commercial classes, each class should receive conservation resources in an amount equivalent to the funding they respectively provide rather than be lumped together. The ICIP approves of a professionally run and formally organized advisory group that does not provide residential ratepayers with a voting majority. Finally, the ICIP supports use of a tariff rider to recover implementation costs, but does not suggest a specific rider amount.
3. Natural Resources Defense Council
The NRDC supports the proposed tariff rider as a mechanism for continued funding, but recommends that it be extended with review through at least 2004. The Council is concerned that the proposed funding level is too low to implement all of the proposed programs and requests that Idaho Power increase its investment levels to be comparable with those of Avista. To better encourage investments in clean and affordable energy by breaking the link between kWh sales and utility revenues, the NRDC urges the Commission to strongly consider modifying current rate design through decoupling, revenue indexing, revenue-per-customer, etc. Finally, the Council advocates adoption of an aggressive implementation, measurement and evaluation schedule.
4. Idaho Rural Council, Idaho Rivers United, Northwest Energy Coalition
and Mary McGown
These Intervenors recommend the Company initiate an independent study evaluating all cost-effective DSM opportunities in its service territory and submit a detailed “DSM Plan” for IPUC/public review 90 days after approval of initial program. The Intervenors also advocate increasing the tariff rider funding level to 1.5% initially, ramping-up to 3% over a 3-year period to be effective indefinitely. They disagree with Idaho Power’s June 2001 public opinion survey regarding customer willingness to fund DSM programs and believe the Company should conduct deliberative polling to elicit informed public opinion on rates, energy supply, energy efficiency and renewables for development of its next Integrated Resource Plan.
The Intervenors recommend the Commission initiate proceedings to evaluate establishing DSM performance-based incentives or a decoupling mechanism like PGE’s “Energy Efficiency Adjustment.” Turning to the Company’s proposal for an Energy Advisory Group, the Intervenors believe that it should be comprised of: (1) one member from each rate class; (2) Commission Staff; (3) Company staff; (4) a member appointed by the Community Action Agencies; and (5) a member appointed by the Northwest Energy Coalition. Noting that the Company’s filing provides only preliminary discussion of major DSM measures, the Intervenors insist that more information is needed to determine the most cost-effective strategy for DSM implementation in the long-term.
5. Commission Staff
Staff agrees with the Company’s proposed tariff rider surcharge amount ($2.6 million annually or a 0.5% increase) on a pay-as-you-go basis. However, Staff is concerned that use of an advisory group may delay DSM program implementation and should also include community action and housing authority representatives. Staff also cautions that utilities often have conflicts of interests with DSM programs and that the Commission may need to monitor the programs.
Staff also suggests that four (including the non-participant cost-effectiveness test) tests be used to screen potential DSM projects. Although the Company’s menu of DSM programs is a starting point, Staff believes that time-of-use metering and rate options were missing. Staff recommends that Idaho Power develop appropriate low-income specific measures. Finally, Staff noted that the Commission may wish to consider whether Idaho Power should notify each of its customers of the proposed DSM surcharge and extend the comment deadline.
6. Idaho Power Company’s Reply Comments
On October 12, 2001, Idaho Power filed reply comments. Responding to time-of-use and decoupling issues, the Company believes the Commission intended this proceeding to examine traditional conservation programs, not rate design issues. To balance the need to quickly implement programs before the winter heating season with the need for the advisory group to review customized programs, Idaho Power recommends that it be authorized to implement some programs once the rider is implemented, in advance of the advisory group’s creation. The Company does not recommend utilizing the non-participant cost-effectiveness test, as it is expensive to prepare and sheds little light on decisions about DSM programs. Idaho Power also offered to notify customers in their billing envelopes of the potential DSM tariff rider or an extended comment period if the Commission determines such notice is necessary.
COMMISSION DISCUSSION AND FINDINGS
This Commission has been supportive of investments made by its regulated utilities in conservation programs so long as those programs are prudent for ratepayers. As the Commission stated in its Order authorizing funding of the Northwest Energy Efficiency Alliance, “we believe that it is one of the responsibilities of this Commission to encourage and facilitate the investment by the utilities we regulate in such programs.” Order No. 27045 at 4-5. Moreover, “the social value of such programs, while difficult to quantify, is undeniable.” Order No. 27375 at 3. The Commission did not then, and does not now, depart from its historical commitment to energy conservation.

1. DSM Programs to be Implemented Immediately
Due to extremely low water conditions and large purchased power costs, Idaho Power’s residential rates have increased a combined average of 31% in the last seven months. Had they been in place during the 2000-2001 PCA year, DSM programs may have reduced power supply costs and the subsequent increases in Idaho Power’s rates. Although DSM programs may be more cost effective than other power supply alternatives, they have costs that must be recovered through customer rates. Given the large rate increases authorized already this year, the Commission is reluctant to raise rates any further by implementing a tariff rider at this time – even to fund a worthy endeavor such as this.
That said, the Commission is very concerned about the ability of customers to manage their electric bills – particularly limited income residential customers who consume large amounts of electricity. To this end, the Commission orders Idaho Power to address the needs of such residential customers in at least three respects. First, the Company shall use a small portion of the funds described below to distribute an informational packet targeted to residential customers who use greater than 2000 kWh per month or qualify for low-income assistance. It is the Commission’s hope that this informational packet will provide customers with effective tools to reduce their electric consumption and inform them of programs like the “Home Energy Audit.” Second, Idaho Power shall expand the availability of the “Home Energy Audit” program it currently has in place. At the customer’s request, an Idaho Power delivery service representative will visit the customer’s home, identify areas of inefficiency and recommend concrete ways to reduce their electricity bills. Finally, Idaho Power shall implement an in-house residential weatherization program as well as enhance its funding to the existing Low Income Weatherization Assistance (LIWA) program.
The Commission authorizes Idaho Power to fund these endeavors by using funds from the Bonneville Power Administration’s (BPA) Conservation and Renewable Discount credit, plus any other available funding methods or sources. This credit provides approximately $43,000 per month for Idaho Power to expend on conservation programs. The Commission will consider any reasonable expenditure beyond the amount provided by the BPA credit for recovery in the 2001-2002 PCA review next spring. The Company is directed to separately account for program expenditures and the BPA conservation revenues it receives.

2. Comprehensive Long-Term DSM Program
The Commission intends to revisit funding a comprehensive, long-term DSM program when Idaho Power submits its 2001-2002 PCA filing next spring. In order to properly consider a future funding mechanism, the Commission orders Idaho Power to form the Energy Efficiency Advisory Group and establish a plan for implementing long-term DSM programs.
The advisory group will recommend new DSM measures, enhance existing DSM programs, prioritize implementation of appropriate programs and evaluate each program’s effectiveness. This advisory group shall have a diverse membership that will attempt to represent the interests of the various customer classes. The views of high-use and low-use groups within the residential class should also be represented. To screen the cost-effectiveness of potential DSM projects, the advisory group shall use the following tests: total resource cost, utility cost and participant cost. However, these tests are merely guidelines that should not used to exclude projects that may be desirable as good public policy. The advisory group is not required to use the non-participant (“no losers”) test.
Although a residential time-of-use metering pilot program may not be appropriate this winter, the Energy Efficiency Advisory Group shall consider implementing such a program using private contractors through a Request for Proposals (RFP) process. The advisory group should also consider installing time-of-use meters in new subdivisions and the feasibility of allowing existing customers to voluntarily install time-of-use meters and amortize the cost over multiple years.
Intervenor Funding
On October 4, 2001, the Land and Water Fund of the Rockies filed a timely request for Intervenor Funding on behalf of the Northwest Energy Coalition, Mary McGown, Idaho Rivers United, and Idaho Rural Council (Intervenors). The Intervenors requested $6,249.04 in funding ($4,632.00 in attorney fees, $1,500.00 in expert consultation fees and $117.04 in copying expenses). Idaho Power filed a Limited Objection to this request on October 9, 2001, observing that “the amount of the request appears to be high” and that a number of issues raised in the Intervenors’ comments were not relevant to the proceeding. The Company did not elaborate further.
The standards for granting Intervenor Funding requests are set out in Idaho Code § 61-617A and our Procedural Rules 161-165 (IDAPA 31.01.01.161-165). Generally, intervenor funding is permitted in those instances where the intervenor has: 1) materially contributed to the Commission’s decision, 2) incurred reasonable intervention costs that would be a significant financial hardship, 3) made a recommendation that materially differed from that of Commission Staff, and 4) addressed issues of concern to the general body of consumers. Based upon our review of the Intervenor Funding Application and the Declaration of William M. Eddie, the Commission finds that the Application conforms to these statutory and procedural standards with one exception noted below. The Commission specifically finds that the Intervenors’ comments: 1) materially contributed to the Commission’s decision, 2) resulted in reasonable intervention costs that would pose a significant financial hardship, 3) made a recommendation that materially differed from that of Commission Staff, and 4) addressed issues of concern to the general body of consumers. The Intervenors’ efforts to promote DSM programs have been highly relevant in light of this season’s need to reduce consumption. In addition, their efforts were largely responsible for the initiation of this docket.
The only item in the Intervenor Funding Application that the Commission shall deny is the $1,500 fee paid to the Tellus Institute. The information provided by the Tellus Institute did not materially contribute to our decision. Consequently, we find that it is not appropriate to allow recovery of the Tellus Institute’s $1,500 expert fee. The Commission directs Idaho Power to pay the Intervenors $4,749.04 as an allowable business expense chargeable to all customer classes under Idaho Code § 61-617A(3).
O R D E R
IT IS HEREBY ORDERED that Idaho Power Company use the BPA Conservation and Renewables Discount credit to: 1) send informational materials targeted to residential customers who use greater than 2000 kWh per month or qualify for low-income assistance; 2) provide Home Energy Audits on customer request; and 3) fund in-house residential weatherization programs and supplement Low Income Weatherization Assistance as described in detail above.
IT IS FURTHER ORDERED that Idaho Power separately account for the DSM expenses addressed in the preceding paragraph and the BPA conservation credits it receives. The Company may seek recovery of reasonable expenditures above the BPA conservation credit.
IT IS FURTHER ORDERED that the Company develop the advisory group discussed above in preparation of the Commission’s further consideration of funding mechanisms next spring.
IT IS FURTHER ORDERED that the Application for Intervenor Funding filed by the Land and Water Fund of the Rockies on behalf of the Northwest Energy Coalition, Mary McGown, Idaho Rivers United, and Idaho Rural Council is hereby granted in the amount of $4,749.04. Idaho Power is directed to pay this amount within twenty-eight days of the date of this Order.
THIS IS A FINAL ORDER. Any person interested in issues finally decided by this Order or in interlocutory Orders previously issued in Case No. IPC-E-01-13 may petition for reconsideration within twenty-one (21) days of the service date of this Order with regard to any matter finally decided in this Order or in interlocutory Orders previously issued in Case No. IPC-E-01-13. For purposes of filing a petition for reconsideration, this order shall become effective as of the service date. Idaho Code § 61-626. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. Idaho Code § 61-626.

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this
day of November 2001.

PAUL KJELLANDER, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

DENNIS S. HANSEN, COMMISSIONER

ATTEST:

Jean D. Jewell
Commission Secretary

O:IPCE0113_ln
NEEA develops and implements market transformation efforts and DSM projects in the Pacific Northwest funded, in part, by Idaho Power. Order Nos. 28333 and 28839.

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ORDER NO. 28894

Office of the Secretary
Service Date
November 21, 2001