20090828Comments.pdf

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 1895
RE.CEiVEO
2009 ~UG 28 PM 2: 52
IDAHO.¡, ~ ~'\
UT\U1\t:S
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 )
A VISTA CORPORATION FOR AUTHORITY )
TO INCREASE ITS TARIFF SCHEDULES 91 )
AND 191 - ENERGY EFFICIENCY PUBLIC )
PURPOSE RIDER ADJUSTMENTS. )
)
)
CASE NO. AVU..E..-6
AVU-G-09-4
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
attorney of record, Scott Woodbur, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure and Notice ofComment/rotest Deadline issued on
July 31, 2009, in Case No. AVE-E-09-6/AVU-G-09-4, submits the following comments.
BACKGROUND
On June 30, 2009, Avista Corporation dba Avista Utilties (Avista; Company) filed an
Application with the Idaho Public Utilties Commission (Commission) requesting approval of an
increase to tariff Schedules 91 and 191 rates, Energy Efficiency Public Purpose Rider
Adjustment. Schedules 91 and 191 are designed to recover the costs incured by the Company
associated with providing electric and natural gas energy efficiency services to customers.
A vista contends the proposed increase in Schedules 91 and 191 rates is necessar to continue to
fud ongoing electric and natural gas efficiency programs consistent with the Company's most
STAFF COMMENTS 1 AUGUST 28, 2009
recent electric and natural gas integrated resource plans (IRPs). It will also serve to amortize a
deficiency balance within the electric and natural gas efficiency tarff riders resulting from the
Company's response to higher than expected customer demand for services.
The estimated anual revenue change associated with the Company's filing is
approximately $5.4 milion for electricity and $1 milion for natural gas, or an increase of2.73%
and 1.0% respectively uniformly spread among all customer classes. An increase in the energy
efficiency taiff has no impact on Company earings.
The Commission, by Interlocutory Order No. 30870 authorized the proposed increases in
Schedules 91 and 191 Energy Effciency Public Purose Rider Adjustments effective August 1,
2009 to coincide with other rate changes occurrng on that date and established a procedural
schedule for investigation and comments.
According to the Company's Application, customers continue to respond to increased
electricity and natural gas prices by pursuing energy efficiency improvements through Avista's
demand-side management (DSM) programs. Existing and planed programmatic expenditues
are exceeding taiff rider revenues. As of the close of May 2009, Avista's electricity DSM tarff
rider balance for Idaho is a negative $2,361,178 and the natural gas DSM tarff rider balance for
Idaho is a negative $1,036,753. The proposed taiff rider increase is estimated to eliminate this
current negative balance by the end of 20 10 and to fud estimated future expenditures.
Schedules 91 and 191 funds support DSM programs described in Schedules 90 and 190.
These programs include but are not limited to the following measures:
. Appliance Measures
. Compressed Air Measures
. HV AC Measures
. Industrial Measures
. Lighting Measures
. Maintenance Measures
. Motors Measures
. Renewable Technologies
. Northwest Energy Efficiency Allance Paricipation
. Shell Measures
. Sustainable Building Measures
The Application states that DSM programs provide financial incentives for cost-effective
efficiency measures installed by customers with a simple payback of greater than one year.
These include more than 300 measures that are packaged into more than 30 programs for
customer convenience.
STAFF COMMENTS 2 AUGUST 28, 2009
A vista maintains that it wil continue to encourage the direct use of natual gas by its
electricity customers. The Company has residential rebates for the conversion of electricity-to-
natural-gas space and water heat loads as well as a broad program for any non-residential
electricity-to-natural-gas conversions meeting specified criteria for relative British Thermal Unit
(BTU) effciency. The cost-effective potential for these measures has been incorporated into
Avista's IRP effort and is contained within the identified acquisition goal. Avista's residential
programs include promotions for high efficiency equipment, electricity-to-natural-gas
conversions, compact florescent lights (CFLs), "second" refrgerator recycling, home
weatherization and rooftop dampers, as well as providing educational assistance through various
community events.
For commercial and industrial customers Avista offers "site-specific" programs, in
addition to prescriptive programs. Site-specific programs are customized to the customer
premises. The site-specific offering provides incentives on commercial and industrial energy
efficiency measures with a simple financial payback exceeding one year. This is implemented
through site analysis, customized diagnosis, and incentives determined for savings generated by
the customers' premises or processes. Commercial and industrial programs available to Avista
customers include:
. Energy Smar Commercial Refrigeration
. Lighting and Controls
. Commercial Food Service Equipment
. Building Retro-commissioning
. Premium Efficiency Motors
. Power Management for Personal Computer (PC) Networks
. LEED Certification, Commercial HVAC Varable Frequency Drives (VFDs)
. Refrigerated Warehouses
. Vending Machine Controllers
. Demand Controlled Ventilation
. Side-stream Filtration
. Steam Trap Replacement and Repair
. Multi-family Development
. LED Traffc Signals
. Electricity-to-Natural-Gas Water Heater Conversions
. Commercial Clothes Washers
In addition to Avista's prescriptive and site-specific programs, the Application states that
the Company fuds and paricipates in the activities of the Northwest Energy Effciency Allance
(NEEA). NEEA focuses on using a regional approach to obtain electricity efficiency through the
STAFF COMMENTS 3 AUGUST 28, 2009
transformation of markets for effciency measures and services. An example of NEE A-
sponsored programs that benefit A vista customers is decreasing the cost of CFLs and high
efficiency appliances by working though manufactuers. For some measures, a large scale,
cross-utility approach is the most cost-effective means to achieve energy efficiency savings.
This approach is paricularly effective for markets composed of large numbers of smaller usage
homogenous consumers, such as the residential and small commercial markets. The results from
NEEA programs are reported in March of the following year. For 2008, Avista's claimed
portion of the regional savings from NEEA programs amounted to 2.1 aMW or more than 18
milion kWh.
Effective October 1,2008, in Order No. 30647 in Docket Nos. AVU-E-08-01 and
AVU-G-08-01, $465,000 was directed to Idaho electricity and natural gas low-income customers
and $25,000 was provided to Idaho Consumer Assistace Program (CAP) agencies for the
purose of underwiting agency personnel assisting in low-income outreach and conservation
education. The low-income weatherization portfolio represents approximately 8% of the
Company's total energy efficiency budget.
The Application states that A vista also paricipated in the energy affordabilty workshops
in Case No. GNR-U-08-01 and that it supports legislative efforts to allow utilties to propose
offering rates and policies that assist low-income customers.
Stakeholder Review
The Company has regularly convened a stakeholders' foru known as the External
Energy Efficiency Board (Triple E). The Application states that these meetings have included
customer representatives, Commission staff members, and individuals from the environmental
communities and that at the meetings the Company's programs and cost-effectiveness tests and
results are reviewed. The Application fuher claims that Avista's DSM programs have been
cost-effective from both a Total Resource Cost (TRC) and Program Administrator Cost Test
(PACT) (formally known as the utilty cost test or UCT) perspective and that the increased
fuding requested in the Company's filing will continue to be subject to the cost-effectiveness
test prescribed by the Commission.
Revised Procedures
To reduce the likelihood of significant positive or negative balances in the futue, Avista
proposes that a schedule be established for the revision of the DSM components of Schedules 91
and 191. Avista proposes to fie on or before Februar 15th of each year to revise the DSM
STAFF COMMENTS 4 AUGUST 28, 2009
portions of the Schedule 91 and 191 tarff rider mechanisms to establish tariff riders that are
sufficient to fund the following twelve months of DSM as well as amortizing any tariff rider
imbalance. It is understood that discussions with interested paries may, from time to time, lead
to modifications of this process in the event that the projected change to the tarff rider is very
small or when changes to the period of time that an imbalance is to be recovered are deemed
appropriate.
The protocols described above, the Company contends, will manage the balances of the
tariff rider mechanism and ensure that sufficient funding is available for the completion of
programmatic measures. The reasons that the taiff rider balances have been negative are
because A vista has acquired, and will continue to acquire, cost-effective energy-efficiency
resources as an importt component of its overall resource portfolio. This includes meeting
customer demand for energy efficiency financial rebates in advance of taiff rider recovery.
STAFF REVIEW
Audit Verifcation of Rider Account Balances
In Case Nos. AVU-E-08-01 and AVU-G-08-01 all paries stipulated that Avista's
expenditures in Idaho for electric and natural gas energy efficiency from November 1,2003
through December 31, 2007 were prudently occured. The Commission affirmed the Stipulation
in Order No. 30647. As a par of the review in this case, Staff audited the energy effciency
expenditures from January 1,2008 through May 31,2009, and verified the reported balance on
May 31, 2009 to be as follows:
Electric Natural Gas
January 1,2008 Rider Balance
Contributions
Interest
Expenditures
Residential Programs
Low Income Programs
Non-Residential Programs
Regional Programs
General Programs
May 31, 2009 Rider Balance
$ 384,396
3,465,578
24,296
$ (407,643)
2,481,719
2,052,941
352,990
2,925,832
310,300
593,383
$(2,361,177)
1,031,663
201,000
1,592,643
(98)
285,607
$(1,036,740)
The Company's Application reported an actual balance for Natual Gas that was an immaterial
$13 less than what Staff was able to verify.
STAFF COMMENTS 5 AUGUST 28, 2009
The projected curent revenues at the current tariff rates would be insufficient to fud the
planed DSM expenditures. Without any changes to the DSM rider funding, the resulting tariff
rider balances would be approximately a negative $10.5 milion for Idaho electric operations and
a negative $2.78 milion for Idaho natural gas operations on December 31, 2010. The proposed
increase in the Schedule 91 and 191 tariffs attempts to reduce the discrepancy between
collections and expenditures and eliminate tariff rider imbalances by the end of201O.
Public Comments
As of August 27,2009, eighteen customers submitted wrtten comments to the
Commission regarding the proposed increases to Schedules 91 and 191 rates, also known as
"energy efficiency tariff riders".
Of the eighteen written comments received, seventeen customers expressed opposition to
the proposed increase. One customer proposed that A vista implement a program to remotely
control the use of air conditioners during times of peak demand.
A wide range of concerns were expressed as to why the Commission should disallow an
increase to the energy efficiency taiff riders with the most prevalent concerns being the poor
state of the economy and recent rate increases granted to the Company. Of the seventeen
customers in opposition, ten referenced either the curent state of the economy, unemployment,
and financial challenges with paying utilty bils. Eight customers cited the Company's recent
general rate increases and questioned the need for another increase.
Five comments were made about executive pay and Company profits.
Concerns about the future viabilty of small businesses were also mentioned. One small
business owner faces the challenge of potentially having to increase the rent of low income
clientele. Another owner stated that she is going out of business because uf the inabilty to pay
higher utility bils.
Electricity Schedule 91
Staff recognizes that rate increases are especially unpopular during hard economic times.
However, Staff is also aware that even more expensive supply-side alternatives have been and
wil continue to be avoided to the extent that customers use existing electricity resources more
effciently. Cost-effective DSM, including energy effciency programs and load management
programs, is a significant resource that helps customers control their utilty bils, reduces the
need for higher-cost, supply-side resources, and increases system reliabilty.
STAFF COMMENTS 6 AUGUST 28, 2009
The least costly electricity resource is customers increasing the effciencies and efficient
use of their buildings, appliances, lights, irrgation systems, and industrial processes without
utilty intervention and administration. Staff believes the second least costly resource is
available when utilities or other entities prudently administer cost-effective programs that
provide monetary incentives and educational opportunities for customers to increase their
effciencies. The most expensive resources are additional generation, transmission and
distribution facilties, regardless of whether the generation facilties are thermal, hydro, wind,
solar or other alternatives.
In spite of many years of utilty DSM programs, it remains evident that most customers,
left on their own, do not use electricity as effciently as rational economic theory suggests they
should. Continued less-than-optimum efficiency by customers is probably due to a combination
of Avista's historically low electricity rates, lack of knowledge and misconceptions about
efficiency, and a perceived need for inordinately high implicit discount rates, i.e. individuals and
business often, if not usually, requiring much higher rates of return for energy efficiency
investments than for competing, alternative investments. This may be due to a skewed
perception of risk, misinformation, and/or other factors. An additional, compounding factor is
the fact that due to rate averaging and inclusion of fixed cost recovery in energy and demand
rates, most retail electricity prices usually do not accurately reflect or track incremental resource
costs.
Whatever the reasons for ineffcient consumption, the result is that Avista's own
analyses, as well as regional and national analyses, show that there remain many efficiency
programs that utilties or other entities can administer cost-effectively. Even though such
administration creates additional costs, the programs can be cost-effective to the extent that the
cash incentives and/or educational efforts result in customers improving their effciencies beyond
what they would do without such programs in amounts sufficient to cost-effectively recoup the
administration costs. Prudently designed and managed programs are expected to be less costly
than curently available supply-side resources. Appropriate post-implementation evaluations
should be completed to furher improve the programs, reassess all assumptions including
baseline trends, and show the actual cost-effectiveness achieved.
Staff expects that A vista's energy efficiency program costs will continue to be prudently
incured and that the programs wil remain cost-effective. However, Staff believes that Avista's
tariff schedule 90 potentially over emphasizes reliance upon the total resource cost (TRC) cost-
STAFF COMMENTS 7 AUGUST 28, 2009
effectiveness test. Staff continues to favor broader cost-effectiveness analyses for utility DSM
from the additional perspectives of all customers, program paricipants and non-participants.
Although A vista curently performs such additional analyses, Staff is concerned about the
Company's tariff language limitation to the TRC perspective. An additional concern is the
tariffs emphasis on portfolio cost-effectiveness, which inappropriately suggests that cost-
effectiveness for individual programs and measures is not important. Conceivably, there are
some non-cost-effective measures for which it may be prudent for A vista to provide incentives if
such measures can be shown to help sell cost-effective measures to customers, but the burden of
proof is on the Company to show how overall net benefit to customers is increased, rather than
decreased.
Regardless of Staffs concerns about tarff language expressed above, it is not Staffs
intent to either validate or question either the Company's DSM prudency or its actual cost-
effectiveness calculations for any of its programs at this time. Such validation and additional
review was not requested in this case and it will occur during the course of a subsequent DSM
prudency review, at which time the Commission determines whether or not Avista's past DSM
expenditures remain recoverable from its customers.
All customer classes are receiving benefits from Avista's electricity DSM programs.
Staff has reviewed the Application's proposed fuding level and supports continuation of the rate
increases in Schedule 91, Energy Efficiency Rider, from approximately 1.25% of base revenues
to approximately 3.98% of base revenues, resulting in a 2.7% rate increase for all customer
classes.
Gas Schedule 191
Most of Staff s reasoning for supporting the electricity DSM tariff rider increase also
applies to the natual gas rider increase. The primar economic differences between the two
energy resources are that wholesale gas costs are much less time-varant and consumption
reductions by customers of individual utilties have less effect on wholesale prices. As a result
of these differences, cost-effectiveness from the non-paricipant perspective is even more
diffcult. Nevertheless, Avista historically has achieved cost-effectiveness from the other major
perspectives, i.e. TRC, UCT and participant, for its natural gas efficiency programs.
All customer classes are receiving benefits from Avista's natural gas DSM programs.
Staff has reviewed the Application's proposed fuding level and supports continuation of the rate
STAFF COMMENTS 8 AUGUST 28, 2009
increases in Schedule 191, Energy Effciency Rider, from approximately 1.6% of base revenues
to approximately 2.6% of base revenues, resulting in al % rate increase for all customer classes.
Proposal for Annual DSM Funding Review
The Application proposes a regularly scheduled, annual review of energy effciency tariff
rider balances and associated adjustments to rider fuding levels. Staff is not necessarly
opposed to anual reviews and revisions per se, but we do not believe it is necessar for the
Commission to order such. Instead of mandated, automatic reviews each year, Staff believes it is
reasonable for the Commission to continue to allow the Company to file revisions to its taiff
riders at any time deemed necessary and appropriate by the Company.
Furthermore, Staff believes it is reasonable to explore other fuding alternatives in the
future. Such alternatives may include recovering some DSM expenses from base rates and/or
capitalizing, rather than expensing, some DSM costs.
STAFF RECOMMENDATION
Staff recommends that the increases in Avista's Schedules 91 and 191 Energy Effciency
Public Purose Rider Adjustments effective August 1, as authorized by Interlocutory Order No.
30870, remain in effect.
Staff recommends that the Commission not accept Avista's proposal to require anual
reviews of Rider balances and adjustments to the Rider levels and instead that the Commission
continue to allow the Company to file proposed changes to Schedules 91 and 191 at the
Company's discretion whenever it is necessary and appropriate to do so, either within or outside
general rate case filings.
Respectfully submitted this -t
êi8 day of August 2009.
~~S~ur
Deputy Attorney General /
Technical Staff: Lynn Anderson
Curis Thaden
Donn English
Bryan Lanspery
i:umisc:commentslavue09 .6/avug09.4swlabldect.doc
STAFF COMMENTS 9 AUGUST 28, 2009
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 28TH DA Y OF AUGUST 2009,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NOS. AVU-E-09-06 AND AVU-G-09-04, BY ELECTRONIC MAIL TO THE
FOLLOWING:
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL
A VISTA CORPORATION
PO BOX 3727
SPOKANE WA 99220
E-MAIL: david.meyer(iavistacorp.com
KELL Y NORWOOD
VICE PRESIDENT - STATE & FED. REG.
A VISTA UTILITIES
PO BOX 3727
SPOKANE WA 99220
E-MAIL: kelly.norwood(iavistacorp.com
~.~¿SECRETARY
CERTIFICATE OF SERVICE