20040719_888.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL STAFF
FROM:SCOTT WOODBURY
DATE:JUNE 24, 2004
RE:CASE NO. IPC-04-15 (Idaho Power)
NW ENERGY COALITION PETITION TO INITIATE INVESTIGATION OF
FINANCIAL DISINCENTIVES TO INVESTMENT IN ENERGY
EFFICIENCY BY IDAHO POWER COMPANY
On June 18, 2004 , the NW Energy Coalition (NWEC; Energy Coalition) filed a
Petition with the Idaho Public Utilities Commission (Commission) to initiate workshop
proceedings to investigate financial disincentives which hinder Idaho Power s investments in
cost-effective energy efficiency resources. Reference IDAPA 31.01.01.033 and 053. The
Energy Coalition was an intervenor in Idaho Power general rate case IPC-03-13. The Energy
Coalition s Petition in this case is a follow-up to the Commission s final Order No. 29505 in the
Idaho Power rate case. Order No. 29505 provided, in relevant part:
The Commission has determined that a proceeding to assess financial
disincentives inherent in Company-sponsored conservation programs is
appropriate and should proceed by informal workshops. The Commission
specifically directs the parties to address possible revenue adjustment
when annual energy consumption is both above and below normal. The
parties should also consider how much adjustment is necessary to remove
DSM investment disincentives and whether (and to what extent)
performance-based incentives such as revenue sharing could or should be
incorporated into the resolution of this issue. The Commission
interested in proposals that could provide Idaho Power the opportunity to
share and retain benefits gained from efficiencies, especially where
efficiencies are derived from innovation and the use of new
technologies.. . . In short, the Commission believes opportunities exist for
improvements in operating efficiency that would benefit the Company
shareholders and its customers, and we encourage the parties to creatively
consider the options for a performance-based mechanism to present to the
DECISION MEMORANDUM
Commission. The parties to the agreement are directed to propose
workshop schedule and initiate a proceeding. (emphasis added)
Order No. 29505 at pp. 68-69. The cited Order language was preceded in the Commission
Order by the following: "A proposal for a second workshop proceeding was sponsored by NW
Energy Coalition, which agreed that financial disincentives hinder Idaho Power s investments in
cost-effective efficiency and clean distributed generation. (emphasis added) In a footnote to its
Petition, NW Energy Coalition states: While the Commission s Order spoke directly to
removing barriers to "efficiency investment", NW Energy Coalition believes the same principles
apply to investment in "clean distributed generation." A copy of the underlying agreement for
Commission review is attached to this memo.
As reflected in the Petition, counsel for the Energy Coalition has conferred with Staff
Idaho Power, and the Industrial Customers of Idaho Power (ICIP) to obtain agreement on
workshop timing and procedures. NW Energy Coalition, Staff, Idaho Power, and ICIP agree to
proceed as follows:
A series of three (3) informal workshops is anticipated, to be concluded by
December 15, 2004. The first workshop will be held starting at 9:30 a.
until approximately 12:30 p.m. on August 24, 2004, at Idaho Power
Company, 1221 West Idaho Street, Boise, Idaho. Dates and locations for
further workshops will be determined at this initial meeting. The Energy
Coalition will provide direct notice of such workshops to all parties to
Case No. IPC-03-13.
As reflected in the Petition, Idaho Power has generously agreed to underwrite the
costs of a facilitator for the workshops. In order to advance discussions, Idaho Power has also
agreed to circulate a "white paper" analysis of the issues identified by the Commission in Order
No. 29505 to Staff, NW Energy Coalition, and ICIP (and other parties that may request the
analysis), by July 24, 2004.
Apart from the initiation of this new proceeding, no specific actions or orders are
requested of the Commission at this time. If no party seeks specific actions or orders of the
Commission by December 15 , 2004, the Energy Coalition commits to provide a status report to
the Commission no later than that date to update the Commission on the status of the
investigative workshops.
DECISION MEMORANDUM
COMMISSION DECISION
NW Energy Coalition requests, as more particularly described above, that the
Commission grant its Petition to initiate an investigation of the financial disincentives to
investment of energy efficiency by Idaho Power Company. An initial workshop is proposed for
August 24, 2004. Commission Staff recommends that a Notice of Investigation and public
workshop be issued. Does the Commission agree with the proposal to establish an investigative
docket and the proposal for workshops?
Does the Commission desire to expand the authorized investigation to comport with
the intent of the agreement parties, i., to explore also economic disincentives to investment in
clean distributed generation?" In Staff discussions with the agreement parties, it appears that
there is an understanding that the intention by the "clean distributed generation" language
limited to "demand side" generation and is related to fixed cost recovery. The seed for the
workshop was Ralph Cavanagh's testimony, which spoke to the need for a fixed cost recovery
true-up mechanism as a means of diminishing the natural reluctance of a Company in the
business of selling energy to try and reduce energy sales. A frequent objection to net metering is
that it cuts into fixed cost recovery and thus is analogous to DSM. It is not the intent of the
parties to open the door to a re-evaluation of PURP A implementation, net metering rules
interconnection issues, etc.
Scott Woodbury
VldJM:IPCEO41S sw
DECISION MEMORANDUM
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO.IPC- E-03 -
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS INTERIM
AND BASE RATES AND CHARGES FOR
ELECTRIC SERVICE
JOINT PROPOSAL TO THE IDAHO PUBLIC UTILITIES COMMISSION
REGARDING POTENTIAL APPROACHES TO REMOVING DISINCENTIVES
FOR IDAHO POWER COMPANY INVESTMENTS IN ENERGY EFFICIENCY
AND CLEAN DISTRIBUTED GENERATION
The undersigned agree as follows:
The record in this matter, including the Direct Testimony of Ralph
Cavanagh, includes evidence that Idaho Power faces financial disincentives to invest in
cost-effective energy efficiency and clean distributed generation as a result of the linkage
between fixed cost recovery and retail electricity consumption.
If the Commission determines that removing these disincentives is in the
public interest, the undersigned parties are prepared to work together to investigate
specific mechanisms for achieving this objective, to identify areas of consensus, and to
clarify alternatives where consensus is not possible.
Should the Commission agree, we recommend that the Commission
initiate a new investigative docket and convene workshops for this purpose, to commence
by August 31 , 2004.
Date William M. Eddie
Attorney for NW Energy Coalition
Date Barton L. Kline
Attorney for Idaho Power Company
Date Lisa D. Nordstrom
Attorney for Idaho Public Utilities
Commission Staff
Date Peter J. Richardson
Attorney for Industrial Customers of
Idaho Power