IPUC Staff Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 1895

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION DBA AVISTA
UTILITIES -WASHINGTON WATER POWER
DIVISION (IDAHO) FOR APPROVAL OF
REQUESTED CHANGES IN ELECTRIC
TARIFF SCHEDULE 91 ENERGY EFFICIENCY
RIDER ADJUSTMENT - IDAHO AND
SCHEDULE 90 ELECTRIC ENERGY
EFFICIENCY PROGRAMS.

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CASE NO. AVU-E-01-7

COMMENTS OF THE
COMMISSION STAFF

COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Scott Woodbury, Deputy Attorney General, and in response to Order No.
28719 issued on April 24, 2001, submits the following comments.
On March 30, 2001, Avista Corporation dba Avista Utilities—Washington Water Power
Division—Idaho filed an Application with the Idaho Public Utilities Commission requesting
approval of proposed changes to Electric Tariff Schedule 90 Electric Energy Efficiency Programs
and Schedule 91 Energy Efficiency Rider Adjustment—Idaho. The Company filed revised
Schedule 90 and 91 as a tariff advice with a requested May 2, 2001 effective date. The
Commission suspended the filing on April 24,1 and processed the Case under modified procedure.
A comment deadline of May 30, 2001 was established. Staff filed a production request on

1 Order No. 28719. IPUC Case No. AVU-E-01-7.
STAFF COMMENTS 1 JUNE 1, 2001
April 24 and the Company provided its responses on May 16 as requested. On May 30 the
Company revised its Application to correct numerical errors.

PROGRAM DESCRIPTION
Avista has a long-standing demand side management (DSM) tariff rider. The Company’s
Tariff Schedule 90 has been in place since January of 1991. Tariff Schedule 91, which specifies
energy surcharges to fund the DSM programs, has been in place since 1995. The program budgets
and other components were adjusted several times to reflect customer and program needs.
Avista’s current Tariff Schedule 90 specifies a three-tiered incentive level where payment
is based on the participant’s simple payback for each individual project. The following table is the
incentive level provided in the Tariff:2

Measures Simple Pay-Back
Period
Incentive Level
(cents per first year kWh saved)
Electric Efficiency 18 to under 48 months 4 cents
48 to under 72 months 6 cents
72 months and longer 8 cents
New Technology Under 48 months 10 cents
48 to under 72 months 12 cents
72 months and longer 14 cents
Fuel-Conversion 24 to under 48 months 1 cent
48 to under 72 months 2 cents
72 months and longer 3 cents

Incentives are capped at 50% of total project costs as determined by the Company and
industry standards. New technologies are capped at 75% of total project costs.3 The Tariff
Schedule 90 also includes non-monetary assistance available across all applicable customer
segments. Non-monetary assistance includes, but is not limited to, educational, financial, product
samples, and technical assistance.4
The current Schedule 90 provides the Company with a significant amount of flexibility to
pursue the most cost-effective programs available to its service territory. Rather than restricting

2 Avista’s Tariff Sheet 90D section 4.1. 3 Id. 4 Avista Tariff Sheet 90E sections 4.2.1-4.2.4.
STAFF COMMENTS 2 JUNE 1, 2001
the Company to exact program specifications, Schedule 90 provides a similar approach for all
projects. In response to Staff Production Request No. 1, the Company describes its approach: 5
Project Approach
Avista has several means of delivering programs within the tariff guidelines. The vast
majority of non-residential projects are pursued on a site-specific basis. These
projects are individually evaluated and incentives are calculated based upon the
application of the tiered incentive structure within Schedule 90. The more unique the
project application, the more customized the site-specific analysis becomes.

Regardless of the engineering approach to the measurement of energy savings, each
site-specific project is evaluated by an incentive calculation model to ensure a
consistent calculation of the customer incentive under the terms of the tariff and the
written policies in place at that time. In the last full trimester for which customer
counts are available, Avista has 372 site-specific projects in progress.

In addition to the site-specific programs, Avista has also developed prescriptive
approaches to specific energy-efficiency measures. This approach is typically
employed when the volume of projects is large, the saving per project is relatively
small and the energy savings per device is reasonably predictable in the aggregate.
Under these circumstances, a steamlined prescriptive approach enhances the program
cost-effectiveness.

A limited-income residential program is conducted in cooperation with local
community action agencies. By leveraging the infrastructure of these agencies Avista
has been able to install multiple energy efficiency measures for 114 customers in the
last reported trimester. These measures are, most frequently, electric to natural gas
space and water heating conversions and various shell measures (predominantly
weatherization, infiltration and replacement of compromised windows). An allowable
health and safety component of the program permits the community action agency to
make structural repairs or appliance replacements as necessary to ensure the long-term
habitability of the structure (and consequently persistence of the energy savings).

Budget
The following is the budget for Idaho with the proposed increases:6
Categories Expected Budget % Expected Budget $
Commercial & Industrial 56% $1,369,019
Residential
(Regular & Limited Income)
22% $547,608
Regional 11% $270,000
Site Specific Service
Agreements
11% $273,804
Total 100% $2,460,431
5 Selected excerpts from Avista’s Response to Production Request No. 1. 6 Application, Tariff Sheet 90F, revised 5/30/01.
STAFF COMMENTS 3 JUNE 1, 2001
Forecasted Schedule 90 revenue per year is actually $2.495 million when street and area
lighting revenues are included. Avista has agreed to modify its filing to reflect this additional
revenue if the Application is approved by the Commission.
The tariff filing proposes to increase the funding level of the existing electric energy
efficiency program from 1.00% to 1.95% of revenue. The Company's original Application said
the increase will generate approximately $1,000,000 of additional revenue for the programs. The
Company has since agreed that the increase is about $1.4 million. The Company estimates that
residential customers will see an average bill (approximately 1200 kWh usage) increase of
approximately 60 cents per month. Average bill increases were not provided for other customer
classes. The Company has completed the required customer notification of this rate increase.
In its Application the Company said the Schedule 91 rate increase will allow it to acquire
an additional 2.5 million-kilowatt hours (kWh) through Schedule 90 energy efficiency programs in
Idaho and about 8 million-kilowatt hours in Idaho and Washington combined. The Company said
there is more demand for these programs from its customers and that the increased wholesale cost
of power has increased the cost-effectiveness of the programs, thus allowing it to do more of them.

STAFF ANALYSIS
While the Commission has allowed Avista considerable flexibility in its DSM programs,
the Commission has nevertheless been cautious regarding the tariff rider level. In fact the
Commission reduced the amount of the tariff rider, from 1.5% to 1.0% of revenue, during the
course of Case No. WWP-E-98-11 because it found the Company was carrying a $1.1 million
balance in the account at the end of 1998. Subsequent to the conclusion of that case, Avista
increased its schedule 90 DSM effort, resulting in a negative $367,001 account balance as of
February 2001. The Company’s Application to increase the Schedule 91 surcharge appears to be
in response to its increased DSM efforts as well as its negative account balance.
An example of Avista’s increased DSM efforts is its compact fluorescent light bulb
program begun this spring in which it is distributing coupons to residential customers that can be
used at local retail businesses to obtain these energy efficient light bulbs. Other examples of new
residential programs for 2001 are those for efficient heat pumps, water heaters, weatherization and
thermostats. In response to a Staff production request, the Company estimated that these new
programs will save 6.7 million kWhs in their first year, of which about one-third would be saved
STAFF COMMENTS 4 JUNE 1, 2001
in Idaho. The energy savings from these new residential programs are about 84% of the total 8
million kWhs that the Company’s Application said that it expects to achieve as a result of the
proposed funding increase.
The Company appears to be adjusting program budgets to reflect the level of inquiries into
its existing programs and to implement new efficiency measures. Its revised budget includes
increases for residential, commercial and industrial and site-specific programs while maintaining
its funding for the Northwest Energy Efficiency Alliance (NEEA).
Staff notes that the percentage increases for most customer classes are greater than the
mathematical 95% that would be expected from increasing the surcharge from 1% to 1.95%. This
occurs because of changes in rates and the proportion of revenue from various tariff elements.
Current Schedule 91 rates were set in 1999 based on rates and the revenue mixture at that time.
Schedule 91 rates have not been changed since then to reflect these changes.
The total revenue rider increase is effectively a true up for the aforementioned changes and
a 95% increase in funding over 2001 revenue projections. The following tables are based on
information provided by the Company and indicate the total increases from current rates and the
funding level anticipated from this request.

Customer Schedule Current
Sch. 91 Rate
Proposed
Sch. 91 Rate
Percent
Increase
Residential, Sch. 1 $0.00045/kWh $0.00104/kWh 131%
Gen. Serv. Sch., 11/12 $0.00069/kWh $0.00140/kWh 103%
Lrg. Gen. Serv., Sch. 21/22 $0.00048/kWh $0.00100/kWh 108%
Ex. Lrg. Gen. Serv., Sch. 25 $0.00028/kWh $0.00068/kWh 143%
Pumping Service, Sch. 31/32 $0.00042/kWh $0.00102/kWh 143%
Lighting Services 1.00% of bill 1.95% of bill 95%
Total Percent of Rev. Basis 1.00% 1.95% 95%

STAFF COMMENTS 5 JUNE 1, 2001
Customer Schedule Current Forecast
Sch. 91 Revenue

Proposed Forecast
Sch. 91 Revenue

Dollar
Increase
Percent
Increase
Residential, Sch. 1 $ 473,061 $ 1,096,210 $ 623,149 131%
Gen. Serv. Sch., 11/12 169,452 344,720 175,268 103%
Lrg. Gen. Serv., Sch. 21/22 352,600 734,180 381,580 108%
Ex. Lrg. Gen. Serv., Sch. 25 94,697 228,540 133,843 141%
Pumping Service, Sch. 31/32 23,398 56,780 33,382 143%
Lighting Services 34,668 67,603 32,935 95%
Total Sch. 91 Rev. Forecast $ 1,147,896 $ 2,528,030 $ 1,380,157 120%

The Company’s original Application had several mathematical errors. The Company has
since filed a revised sheet 90F indicating a more accurate revenue and budget calculation and has
agreed that an additional revision may be necessary to include minor revenues from street and area
lighting services. Avista did not provide adequate information to ascertain whether the surcharge
should be based on precisely 1.95% of revenues for optimal cost-effectiveness and program
solvency.
The Company must continue to evaluate programs to assure its customers and the
Commission that only cost-effective programs are funded. The Company provided its July 2000
Triple-E Report purporting to show that its programs are cost-effective. Staff has not
independently evaluated the cost-effectiveness or prudence of Avista’s Schedule 90 DSM
programs in this case. Staff will continue to participate in the on-going review of these programs
by Avista’s Triple-E Board, but is mindful that the Company cannot rely upon the board or any of
its individual members to determine whether or not its DSM activities will be judged by the
Commission to be reasonable and prudent.

STAFF RECOMMENDATIONS
Staff recommends approval of the requested 95% increase to the existing 1%-based
Schedule 91 rates. Staff also recommends that the Company continue its current accounting
procedures and reporting requirements.

STAFF COMMENTS 6 JUNE 1, 2001
STAFF COMMENTS 7 JUNE 1, 2001
Respectively submitted this day of June 2001.

________________________________________
Scott Woodbury
Deputy Attorney General

Technical Staff: Michael Fuss
Lynn Anderson

SW:jo:i:umisc/comments/avue01.7swmfuss