20170120ICL & NWEC to INT 1-16.pdf

Benjamin J. Otto (ISB No. 8292)
710 N 6th Street
Boise, ID 83701
Ph: [phone] x 12
Fax: [phone]
[e-mail]
Attorney for the Idaho Conservation League
and the NW Energy Coalition
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE
APPLICATION OF INTERMOUNTAIN
GAS COMPANY FOR THE
AUTHORITY TO CHANGE ITS RATES
AND CHARGES FOR NAUTRAL GAS
SERVICE TO NATURAL GAS
CUSTOMERS IN THE STATE OF
IDAHO
)
)
)
)
)
CASE NO. INT-G-16-02
IDAHO CONSERVATION LEAGUE
AND THE NW ENERGY COALITION
) RESPONSE TO INTERMOUNTAIN GAS
) COMPANY'S FIRST PRODUCTION
) REQUEST
COMES NOW ICL and NWEC in response to the First Production Request of
Intermountain Gas Company to ICL and NWEC dated December 30, 2016:
REQUEST N0.1: What specific characteristics of the Company's DSM program make it "more
of a fuel switching incentive than a true DSM program " as stated in Witness Riva 's. testimony on
page 1, lines 18-21?
ANSWER: Intermountain Gas proposes two tiers of incentives for gas conservation as shown in
Exhibit 312, pages 11 -12. Tier 1 is designated for existing gas customers to upgrade to higher
efficiency equipment. This is a conservation program because it encourages customers to acquire
the same services using less gas commodity. Tier 2 is designated for customers switching from
non-gas to gas powered space and water heating. This is a fuel-switching program because it
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 1
encourages individuals to switch from electric to gas to receive the same service. One reason ICL
and NWEC believe Intermountain Gas's proposal is more of a fuel switching program is that the
incentives for the same equipment are higher for Tier 2 fuel switching customers than for Tier 1
conservation customers. Second, Intermountain makes no effort to set goals for either Tier and
instead focuses in several parts of the testimony on the generalized benefits, as opposed to the
customer specific benefits, of fuel switching and direct use of natural gas. The third reason is that
Intermountain makes no effort to propose common conservation measures like building shell
sealing and insulation, home energy audits, or low flow water fixtures.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 2
REQUEST NO. 2: Is the direct use of natural gas mutually exclusive to a program that drives
upgrades from existing natural gas to high-efficiency natural gas equipment?
ANSWER:No.
Sponsor: Diego Rivas, [phone]
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 3
REQUEST NO. 3: What specifically in the design of the Company 's DSM program prohibits or
discourages customers from migrating.from standard efficiency to high-efficiency natural gas
equipment?
ANSWER: ICL and NWEC coalition make no claim that Intermountain Gas's program design
prohibits or discourages customers from upgrading existing equipment to higher efficiency unit.
However, the likelihood of this upgrade without the need to replace a broken appliance is
extremely unlikely. IGCs own program history proves this point. As stated in response to Staff
Request No. 158, "All participants in the Residential Space Heating Equipment Rebate under
current rate schedule ER were new heating customers" ( emphasis added). Furthermore, should a
customer upgrade from a standard efficiency to a high-efficiency natural gas appliance, that
customer has zeroed out their efficiency possibilities from IGCs proposed DSM program.
Meanwhile that customer could have no or insufficient insulation, leaky windows and/or a
showerhead pumping out 2.5 gallons per minute. Failure to address these conservation potentials
severely limits the effectiveness of high-efficiency appliances.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 4
REQUEST NO. 4: What "large segment " of the Company 's residential customer base,
referenced on page two, lines 3-5 is being ignored by the design of its current rebate program?
ANSWER: Mr. Rivas' testimony reads: "While there may be some savings to be had in
encouraging fuel switchers to purchase more efficient appliances, the Company is ignoring large
segments of their customer base and should be looking more broadly in the development of their
DSM program." The phrase "large segments of their customer base" refers to the Intermountain
customers in the residential class who do not have a realistic ability to participate in the proposed
gas DSM incentives. While the company could argue that all customers have access to the high
capital cost equipment incentives, it is reasonable to assume -and IGC's own program history
proves -that fuel-switchers will make up the vast majority, if not all, of the participants in the
proposed DSM program. Furthermore, non-owners (i.e. renters) who rely on landlords to provide
space and water heating equipment will have zero direct access to IGC conservation programs.
Renters could, however, likely install items such as faucet aerators and/or low-flow
showerheads.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 5
REQUEST NO. 5: Does !CL have any recommendations regarding the quantification of savings
achieved through engagement in market transformation efforts such as NEEA?
ANSWER: The Northwest Energy Efficiency Alliance is a nonprofit alliance of utilities and
other regional stakeholders working together to drive market adoption of energy efficiency
products, services and practices. Initially NEEA focused on serving the electric utility market,
but recently has expanded to include natural gas energy efficiency. Since 1996, the region has
cost-effectively delivered over 1,275 aMW of energy efficiency through market transformation -
enough energy to power more than 900,000 homes each year. NEEA has developed detailed
methodology to assign savings to participating utilities, and all state utility commissions in the
Pacific Northwest recognize this methodology. ICL and NWEC recommend Intermountain adopt
the method to quantify savings as all other utility participants in NEEA use.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 6
REQUEST NO. 6: On page 8 lines 8-11, Witness Rivas notes that "generally speaking, the floor
for achievable potential in utility conservation assessments is around 70% of economic
potential. " Please provide examples of situations where potential has been assessed under the
Utility Cost Test, that achievable potential reflects 70% of economic potential.
ANSWER: Due to the overwhelming usage of the Total Resource Cost test (TRC), we found no
completed conservation potential assessments using the Utility Cost Test (UCT) in the Pacific
Northwest. However, the specific cost-effectiveness test used to determine economic potential
has no bearing on achievable potential using the technical -economic -achievable -
programmatic construct. Achievable potential simply measures the amount cost-effective energy
efficiency (economic)-be it cost-effective using the UCT or TRC-that can reasonably be
achieved in the marketplace. Or as stated in the EPA guidebook to potential studies, "Achievable
potential is the amount of energy use that efficiency can realistically be expected to displace
assuming the most aggressive program scenario possible ... Achievable potential takes into
account real-world barriers to convincing end-users to adopt efficiency measures, the non­
measure costs of delivering programs ... and the capability of programs and administrators to
ramp up program activity over time. 1"
Programmatic potential then refines that number to determine the amount of energy
efficiency that can be captured through the utility's DSM program. Our concern arrives from the
fact that IGC, in their in-house assessment, refined the economic potential by using both
achievable and programmatic potential to define achievable potential. That number was then
1 National Action Plan for Energy Efficiency (2007). Guide for Conducting Energy Efficiency Potential Studies. Prepared by
Philip Mosenthal and Jeffrey Loiter, Optimal Energy, Inc. <www.epa.gov/eeactionplan>
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 7
refined further again based on the "information" of field staff to develop the programmatic
potential. We find this to be over-refinement to be without merit.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 8
REQUEST NO. 7: Please explain how !CL 's proposed portfolio of direct install showerheads
and weatherization, paired with equipment incentives would lead to an anticipated first-year
savings achievement of 1. 71 million therms saved during the ramp-up year. Please provide all
working papers and analysis validating this estimate.
ANSWER: ICL and NWEC do not claim Intermountain could enact any suite of measures that
would accomplish 1. 71 million terms of savings in the initial program year. Our testimony is that
a well-designed suite of measures in a mature program would be expected to achieve at least
70% of economic potential over a 20-year period. We recognize that Intermountain will require a
few years to ramp up conservation program achievements. Our testimony is that the appropriate
achievable potential to target is the Northwest Power and Conservation Council's 85% metric. A
third-party conducted conservation potential assessment would better outline appropriate
measures and targets for IGCs DSM program.
Sponsor: Diego Rivas, [phone]
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 9
REQUEST NO. 8: Please provide a detailed description of and examples of similarly sized
natural gas utilities in the region with an achievable residential potential of 1. 71 million therms
in the first program year.
ANSWER: Again, our testimony is that 70% of the economic is the appropriate target for a
mature suite of programs. We understand it will take some ramp up, but this is the appropriate
target.
Sponsor: Diego Rivas, [phone]
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 10
REQUEST NO. 9: Does !CL have a specific valuation methodology its recommends for
quantifying the benefits of Low Income Weatherization Programs? What recommendations does
!CL have regarding treatment of recovery from a regulatory standpoint?
ANSWER: ICL and NWEC propose Intermountain Gas use the same method to value the
benefits of low income weatherization as that used to value any gas conservation measure, or
other existing low income weatherization programs in Idaho. ICL and NWEC propose that all
costs of the low-income weatherization program are recoverable through rates in the same
manner as any other conservation program.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 11
REQUEST NO. JO: In reference to the direct testimony of Diego Rivas, Page 3 L 13-14
that due to additional gas fired electric generation "the price of natural gas would undoubtedly
increase ", and Page 4, L 10-11 "[W}e can expect the price of natural gas to increase " please
provide:
a.) All workpapers or documentation relied on to support these statements of expecting
natural gas prices to be rising,
ANSWER: Energy Information Administration: The Henry Hub natural gas spot price averaged
$2.51/MMBtu in 2016, and it is expected to increase to an average of $3.55/MMBtu in 2017 and
then average $3.73/MMBtu in 2018. Prices generally increased throughout 2016 because of high
natural gas use for electricity generation during the hot summer and because of declining
production. Henry Hub spot prices in December 2016 averaged $3.59/MMBtu, when inventories
fell below the five-year average. This was the first time the price averaged more than $3/MMBtu
for a month since December 2014 2•
b) At what locations or gas trading hubs in the US would these prices expect to occur?
Are all prices at all hubs expected to rise at the same time and same rate?
ANSWER: The exact location of each price change is impossible to predict, and ICL/NWEC do
not expect the same changes at the same time at every trading hub. Regardless, having this
foresight is not especially important for this testimony in this case. Mr. Rivas' s testimony takes
the simple position that increased demand for natural gas is likely to result in increased gas
prices. He makes no claim to the exact amount, timing, or location of this change,
2 http://www.eia.gov/outlooks/steo/report/natgas.cfm
INT-G-16-02
ICL/NWEC Production Response to IGC 12
January 20, 2017
c) What are annual natural gas volumes sold in USA, in the northwest and in Idaho?
ANSWER: Mr. Rivas's testimony does not rely on an analysis ofrelative natural gas volumes
sold in various markets. Data on natural gas volumes is available here:
http://www.eia.gov/outlooks/steo/report/natgas.cfm.
d) What is the expected annual increase in natural gas sales in Northwest and in Idaho
that are anticipated by Mr. Rivas to be due to fuel switching, projected out for the next 5 years?
ANSWER: Mr. Rivas relied on the findings of the Northwest Power and Conservation Council's
?1h Plan, Appendix N: Direct Use of Natural Gas. Figure N-6 shows an increase of between 3 and
4 Trillion British Thermal Units (TBTU) in direct use consumption in 2020. While the Council
does not state that this entire increase in consumption is due to fuel-switching, the entire analysis
was done to gage market share of natural gas end uses.
e.) Does Mr. Rivas agree or disagree that conservations programs could or do lead to
lower gas sales, in the US, the region or in Idaho?
ANSWER: Mr. Rivas agrees that conservation programs aimed at reducing natural gas usage do
indeed lead to lower gas sales. However, Mr. Rivas also stands by his assertion that
"conservation" programs based entirely on encouraging fuel-switching could potentially have the
opposite effect and lead to increased gas sales.
f) Does Mr. Rivas agree or disagree that replacement of older gas appliances by new
more efficient ones lead to lower natural gas sales?
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 13
ANSWER: Mr. Rivas agrees that natural gas sales to that specific customer would likely
decrease. However, taken in aggregate, including customers who switch from electricity to
natural gas, Mr. Rivas continues to express concern that total utility natural gas sales could
mcrease.
g) Is it Mr. Rivas ' opinion that it is more likely, or less likely, that the volumetric changes
in gas consumption due to conservation and fuel switching affects Idaho, regional or national
gas prices more than or less than changes in the weather?
ANSWER: Because southern Idaho does not have a meaningful gas conservation program in
operation, it is impossible to compare the outcome of this program to changes in gas
consumption attributable to weather. As to likelihood of impacts, this depends on several
assumptions not identified by Intermountain including: the ratio of fixed costs in volumetric
sales, the application of weather normalizing adjustments, Company hedging practices and
commodity supply contracts, supply and demand considerations by other gas customers
purchasing from the same market hubs, and deviations between expected and actual weather for
local, regional, and national gas utilities and gas purchasers.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
I CL/NWEC Production Response to I GC 14
REQUEST NO. 11: In reference to the direct testimony of Diego Rivas, Page 6 L 6 "high
capital cost equipment ":
a) At what point does capital equipment become "high cost."
ANSWER: "High" and "Low" costs are relative terms that have unique meanings for each
individual depending on their economic position, and perspective on competing uses for their
money. In general, most people would agree that furnaces and hot water heaters are high cost.
Low-flow showerheads and faucet aerators are low-cost.
b) What are some of the examples and the costs of "low cost, easy to install" measures
referred to by Mr. Rivas?
ANSWER: One example is the "Energy Savings Kit" offered by IGC's sister company Cascade
Natural Gas, which includes low flow showerheads and faucet aerators. Other examples of low
cost equipment include: insulating water pipes near a water heater, changing a furnace filter
regularly, or sealing air leaks around windows and doors. No cost behavioral changes include
educating and encouraging customers to conserve gas by: washing only full loads of laundry in
cold water, opening a closing window shades to harvest sunlight and avoid drafts, and setting
appropriate thermostat and water temperature controls.
c) At what point does the price of equipment become high cost, and a price inhibitor or
barrier for a consumer to purchase such equipment?
ANSWER: This barrier is unique to each customer demanding on economic conditions,
competing needs for the funds by a family, access to financing, need for new equipment relative
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 15
to other economic needs of the customer, and desire for the services rendered by their equipment.
However, common sense dictates that purchasing new heating equipment is typically a large
expense for most Idahoans. Accordingly, any incentive for higher efficiency equipment is useful.
ICL and NWEC position is that these incentives should be coupled with additional incentives to
conserve gas through improving the building shell and usage characteristics of the end users.
d) Please provide any workpapers, data or analysis showing prices for appliances that
are high-cost, low-cost or what Mr. Rivas considers to be median or regular cost.
ANSWER: Mr. Rivas did not preform this analysis because his testimony is in regards to
appliances versus low-cost measures, not comparing among appliances.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 16
REQUEST NO. 12: In reference to the direct testimony of Diego Rivas, Page 9 L 20
"decoupling should address forgone fixed cost recovery attributable to utility actions to promote
conservation. " Is it !CL 's position that revenue decoupling is inappropriate for any reason
other than revenue loss associated with DSM or conservation? If !CL believes revenue
decoupling is also appropriate for other reasons, what would be those reasons?
Answer: ICL and NWEC believe the primary purpose of revenue decoupling is to address the
revenue volatility that arises from collecting fixed utility costs through volumetric rates. We
believe that utility caused actions that impact this fixed cost collection are an appropriate place
for policy intervention. We believe that non-utility caused actions, such as weather, that impact
this fixed cost recovery are a normal part of the utility risk profile and thus policy intervention is
not warranted.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 17
REQUEST NO. 13: Please explain how ''fixed costs" become "volatile" as discussed in the
testimony of Mr. Rivas at page 10, lines 2 and 3.
Answer: Mr. Rivas' testimony states: "Accordingly, at least in the early years of the DSM
program ramp-up, most of the fixed cost volatility comes from factors outside Intermountain's
control." In this sentence the phrase "fixed cost volatility" refers to volatility in the collection of
fixed costs, not the amount of fixed costs. Collection of fixed costs becomes volatile, or deviates
from expectations, when actual sales to not match forecasts. This can occur due to several
countervailing factors such as: poorly formed forecasts, changes in assumed economic activity or
customer growth, changes in assumed usage per customer, and changes in assumed weather.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 18
REQUEST NO. 14: In reference to the direct testimony of Mr. Rivas, P. 11 L 21 "total gas
sales ... will likely increase. "Please provide all workpapers or studies relied on to support this
statement?
ANSWER: Mr. Rivas' testimony states: "Without the presence of DSM measures for existing
customers, total utility natural gas sales will likely increase rather than decrease due to fuel­
switching new customers." This statement is based on the common sense assumption that if
Intermountain induces a customer to switch from electric to natural gas space heating, and does
not induce reduced gas consumption of existing customers through conservation incentives, then
sales of natural gas will increase.
Sponsor: Diego Rivas, [phone]
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 19
REQUEST NO. 15: Referring to Mr. Rivas testimony at page 12, L 17, that of the 25 natural
gas decoupled utilities, "19 of them used an annual rate true-up mechanism, " would !CL
support a rate true-up mechanism similar to what a majority of other state regulatory
commissions do for natural gas decoupled utilities?
ANSWER: NWEC/ICL would support an annual rate true-up mechanism connected to the
financial impacts of a fully formed DSM program.
Sponsor: Diego Rivas, ( 406) 461-6632
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 20
REQUEST NO. 16: In reference to the direct testimony of Diego Rivas, P. 18 L 1 "" better
policy option ... inclining block rate " ... Would !CL support or oppose "budget billing"?
ANSWER: There is no single definition of "budget billing" so without more explanation ICL
and NWEC cannot respond directly to this request. However, in general, iflntermountain's
question is referring to a billing plan that allows customers to pay an equal amount each month,
then ICL and NWEC do not support this policy. We believe that Idaho state policy encourages
the use of rates that encourage the efficient use of energy resources. Equal monthly bills that do
not reflect changes in energy consumption do not serve this policy and should be avoided.
ICL/NWEC would support exceptions to be made for low-income and fixed-income households.
Sponsor: Diego Rivas, [phone]
INT-G-16-02 January 20, 2017
I CL/NWEC Production Response to I GC 21
Respectfully submitted this 20" day of January 2017, a 4-­
Benjamin J. Otto
Attorney for !CL and N WEC
INT-G-16-02 January 20, 2017
ICL/NWEC Production Response to IGC 22
CERTIFICATE OF SERVICE
I hereby certify that on this 20th day of January 2017 I delivered true and correct copies
of the foregoing RESPONSE TO THE FIRST PRODUCTION REQUEST OF
INTERMOUNTAIN GAS to the following persons via the method of service noted:
Hand delivery:
Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
427 W. Washington St.
Boise, ID 83702-5983
( Original, 3 copies)
Electronic Mail Only:
INTERMOUNTAIN GAS
Ronald L. Williams
Williams Bradbury, PC
1015 W. Hays Street
Boise, ID 83 702
Phone: [phone]
[e-mail]
Michael P. McGrath
Director -Regulatory Affairs
Intermountain Gas Company
55 S. Cole Road
PO Box 7608
Boise, ID 83707
Phon~ [phone]
[e-mail]
COMMUNITY ACTION PARTNERSHIP
ASSOCIATION OF IDAHO
BradM Purdy
Attorney at Law
2019 N. 17th St.
Boise, ID 83702
Phone: [phone]
[e-mail]
INT-G-16-02
ICL/NWEC Production Response to IGC 23
a~-
Benjamin J. Otto
NORTHWEST INDUSTRIAL GAS USERS
cl o Edward A Finklea
Executive Director
545 Grandview Drive
Ashland, OR 97520
Phone: [phone]
[e-mail]
Chad M. Stokes
Tommy A Brooks
Cable Huston LLP
1001 SW Fifth Ave., Suite 2000
Portland, OR 97204-1136
Phone: [phone]
[e-mail]
[e-mail]
Michael C. Creamer (ISB No. 4030)
Givens Pursley LLP
601 W Bannock St.
Boise, ID 83702
Phone: [phone]
[e-mail]
THE AMALGAMATED SUGAR CO. LLC
Peter Richardson
Gregory M. Adams
Richardson Adams PLLC
January 20, 2017
515 N. 27th St.
Boise, ID 83 702
[e-mail]
[e-mail]
Scott Dale Blickenstaff
The Amalgamated Sugar Company LLC
1951 S. Saturn Way, Suite 100
Boise, ID 83 709
[e-mail]
SNAKE RIVER ALLIANCE
Ken Miller
Snake River Alliance
223 N. 61h St. Suite 317
P.O. Box 1731
Boise, ID 83701
[e-mail]
FEDERAL EXECUTIVE AGENCIES
Andrew J. Unsicker
Lanny L. Zieman
Natalie A. Cepak
Thomas A. Jernigan
Ebony M. Payton
AFLOA/JA-ULFSC
139 Barnes Dr., Suite 1
Tyndall AFB, FL 32403
Andrew. [e-mail]
Lanny .zieman. l @us.af.mil
[e-mail]
[e-mail]
[e-mail]
INT-G-16-02
ICL/NWEC Production Response to IGC
January 20, 2017
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