20120926final_order_no_32652.pdf

Office of the Secretary
Service Date
September26,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )CORPORATION’S APPLICATION TO )CASE NOS.AVU-E-12-07
REVISE ITS ELECTRIC ENERGY )EFFICIENCY RIDER ADJUSTMENT,)SCHEDULE 91.)ORDER NO.32652
_________________________________________________________________________________
)
On July 31,2012,Avista Corporation dba Avista Utilities applied to the Commission
for an Order allowing Avista to decrease the Schedule 91 rate adjustment (the “Energy
Efficiency Rider Adjustment”).’The Company asks that the case be processed under Modified
Procedure,and that the changes take effect on October 1,2012.See Application.
On August 16,2012,the Commission solicited public input on the Application and
set a September 17,2012 comment deadline.Staff,individual members of the public,the Snake
River Alliance,and the Idaho Conservation League (ICL)submitted written comments.ICL also
intervened as a party in the case.
With this Order,we grant the Company’s Application as discussed below.
THE APPLICATION
With this Application,Avista requests authority to adjust the portion of Schedule 91
rider that funds electric demand-side management (DSM)programs described in Schedule 90.
Id.at 4.Avista says its proposed changes will reduce billed electric rates by 1.3%.Id.at 1.
The Company says that in 2010-2011,its energy efficiency programs and measures
resulted in electric savings of 59,002 MWh (115%of the Integrated Resource Plan (IRP)goal)in
Idaho.Id.at 2.
The Company states that in 2011,its electric DSM portfolio was cost-effective with a
Total Resource Cost (TRC)test and Program Administrator Cost (PAC)ratios of 1.80 and 2.88,
respectively.Id.at 6-7.
The Company maintains that the revenue expected to be generated by the Schedule
91 surcharge at its present level would exceed the requirements necessary to fund the DSM
activities during the next 12-month cycle,including adjustments for the disposition of rider
H Avista filed a single,combined Application in Case Nos.AVU-E-12-07 and AVU-G-12-06.The Commission
subsequently consolidated AVU-G-12-06 with another case,AVU-G-12-03.See Notice of Application,Case Nos.
AVU-G-12-03 and AVU-G-12-06.Accordingly,the instant case,AVU-E-12-07 is being processed by itself.
ORDER NO.32652 1
imbalances.Through June 2012,the electric DSM tariff rider balance was $316,231 (Company
owes ratepayer).Id.2-3.
The Company further maintains that only 55%of the currently projected rider
surcharge revenue is needed to fund expected DSM operations for the 12 months following
October 1,2012,given a projected balance of $886,761 at the end of September 2012.Thus,the
Company wants to decrease the rider surcharge by 45%as of October 1,2012.The Company
says decreasing the surcharge will not impact the Company’s ability to fund and pursue cost-
effective DSM resources;it will merely adjust revenues to move the rider balance towards zero.
Id.at 3.The Company says decreasing Schedule 91 rates and charges will decrease the
Company’s estimated annual revenue by $3,464,000 (a decrease of 1.3%of billed rates).The
Company says the proposed rate decrease will have an average monthly bill impact to residential
electric customers using 939 kWh of$l.05.Id.at 7,
THE COMMENTS
Commission Staff,individual members of the public,Snake River Alliance,and ICL
submitted written comments.The comments are summarized below.
StaffComments
Staff supports the Company’s proposal to decrease the Schedule 91 electric energy
efficiency rider.Staff confirmed that the Company’s proposed decrease will not prevent the
Company from pursuing all cost-effective DSM.Rather,the decrease will gradually align rider
revenues to expenditures over the next 12 months so the rider fund balance is zero by September
2013.Staff Comments at 2.
Staff said that the Company wants to decrease the rider due to declining customer
participation in rider-funded programs caused by:(1)the end of federal American Recovery and
Reinvestment Act (i.e.,ARRA or Stimulus)tax incentives for energy efficient measures,and (2)
a persistent sluggish economy that discourages customers from investing in energy efficient
appliances.Staff said it is reasonable for the Company to return an over-collected rider balance
to customers now given the difficult economic conditions.id.at 2-3.
Staff verified that the Company’s rider balance is $316,231 (over collection)as of
June 2012,and that it will likely reach $887,000 by October 1,2012.Id.at 3.For October 2012
thru September 2013,the Company forecasts the following rider balance with the proposed rider
adjustments:
ORDER NO.32652 2
Expenditures:$5,028,751
Revenues:$4,190,189
Accumulated 2012 Rider balance to be applied to 2013 revenues:$886,761
September 2013 Rider balance:$0
Id.
Staff said it is reasonable for the Company to return the rider balance to customers
within 12 months due to the decreased amount of forecasted rider expenditures.Staff noted that
the Company says it will file an annual true-up of Schedule 91 to coincide with other annual
filings (e.g.,the Power Cost Adjustment and Purchased Gas Cost Adjustment),Staff does not
necessarily support annually changing the rider rate.Staff does,however,support the
Company’s pursuit of all cost-effective DSM,and Staff would expect the Company to seek a
rider increase if actual cost-effective DSM expenditures exceed rider revenues.Id.
Staff notes that in Case No.AVU-E-09-06,the Company asked to increase the rider
primarily to eliminate a large rider deficit,and that the Commission approved the increase in
Order No.30918.Staff opined that in this case,the decrease in DSM participation due to the end
of ARRA tax incentives and a continuing stagnant economy,combined with an over-funded rider
designed to reduce prior deficits,makes the Company’s proposal to decrease the rider
reasonable.Id.at 4-5.
Based on its review,Staff recommended the Commission approve the Company’s
request to reduce the electric energy efficiency rider,Schedule 91,by 1.3%of billed revenue
effective October 1,2012.Id.at 5.
Individual Public Comments
The Commission received two comments from Avista customers.2 Both customers
opposed Avista’s Application.One customer said the Commission should not reduce the rider
until there is better evidence showing that Avista is over-collecting and looking for new energy
efficiency opportunities.The second customer submitted a form-letter comment.That comment
notes that the Commission repeatedly stresses that energy efficiency is the least-cost resource
available to electric utilities and that utilities should be encouraged to increase energy efficiency
programs.The comment also notes that there are new technologies to obtain more savings,and
that while Avista has done a good job in providing efficiency programs and incentives,it can do
2 Eleven members of the public from southern Idaho commented using what appears to be a form letter.The formlettercommentsaresubstantiallythesameasoneofthecommentssubmittedbyoneofthetwoAvistacustomers.
ORDER NO.32652 3
better.The comment said that if Avista continues to pursue all cost-effective energy efficiency,
then decreasing the efficiency rider could increase the risk that Avista’s DSM programs will be
underfunded in the future.The customer concluded by saying that customers will hardly notice
impact of reducing rider funding,and that the savings from a well-funded DSM program will
more than offset the cost of the rider.
Snake River Alliance Comments
The Snake River Alliance (the Alliance”)said it does not support the Company’s
request to decrease its electric energy efficiency rider rate because the request is premature and
potentially will undermine ongoing attempts to expand the Company’s Idaho DSM programs.
Alliance Comments at 1.The Alliance’s arguments echo the arguments it raised earlier this year
when Rocky Mountain Power sought and received Commission permission to decrease its
customer efficiency services rate.Id.In sum,the Alliance argues that the standard for reviewing
a request to change DSM funding levels should not be that a utility is concerned about the
possibility that it may over-collect (as may be the case here),but rather that the Commission be
presented with evidence that the utility actually did over-collect.”Id.at 2.“A request to change
the level of customer financing of DSM programs—whether higher or lower—must be
accompanied with compelling evidence that a repeated imbalance in collections is occurring and
must be corrected.”Id.at 3.The Alliance says Avista has not established a record of ongoing
over-collection of DSM funds from customers,and that the “short time period in which DSM
funds were over-collected and the magnitude of the over-collections does not allow the
Commission to determine the wisdom of such a dramatic reduction of 45 percent in efficiency
rider funds.”Id.at 2.The Alliance finds it difficult to conclude that such an abrupt and deep
reduction in DSM collections and spending will not have an impact on exiting future DSM
programs.Id.The Alliance suggests that Avista be allowed sufficient time to justify a 45
percent reduction in its energy efficiency rider level,and that it return to the Commission after it
has established that the DSM account is being repeatedly overfund.Id.
ICL Comments
ICL says that when Avista asked to reduce its natural gas rider in 2011,the
Commission approved a moderate reduction that would ‘al1ow Avista’s customers a rate
reduction while ensuring adequate funding for the Company’s DSM programs for the next two
years.”ICL Comments at 1 (quoting Order No.32366 at 2).ICL urges the Commission to do
ORDER NO.32652 4
the same thing here.Id.at 1.ICL says that “with Avista’s track record of exceeding their DSM
targets and the continued cost effectiveness of their DSM portfolio,the public interest is best
served by maintaining the current rider level until Avista establishes the expected DSM expense
over the next two years.”Id.at 2.
ICL argues that Avista has provided no evidence to support its requested rider rate
decrease.There is no evidence of what Avista expects its DSM expenses will be over the
coming two years.There is no evidence supporting Avista’s claim that only 55%of the
projected electric DSM tariff revenue is necessary to fund the expected DSM operations for the
12 months following October 12,2012.Id.at 1.ICL says the Company will produce its 2013
DSM Business Plan by November 1,2012,and that the Plan will provide a basis upon which to
set an appropriate rider level to cover future DSM expenses.Id.at 1-2.ICL argues that the
Commission should not adjust the rider until Avista completes its 2013 DSM Business Plan and
documents the expected DSM expenses for 2013.Id.at 3.
ICL notes that the available evidence (including Avista’s 2011 IRP)shows Avista is
entering a phase of continued growth with increasing levels of achievable energy efficiencies for
the foreseeable future.Id.at 1-2.ICL says the Commission should ensure the DSM rider is
sufficient to eliminate any budget constraints on the Company’s duty to pursue all cost-effective
energy efficiencies.Id.at 2.ICL says that given the increasing DSM targets,if the Commission
adjusts the DSM rider based on 2011 performance,customers face the real risk of decrease today
followed by an increase next year.Id.at 2.ICL says it concurs with Staff’s position in Case No.
AVU-G-1 1-03,which involved Avista’s request to decrease its gas DSM tariff:“Annual DSM
tariff rider changes are burdensome and disorienting to customers,especially compounded by
annual PGA changes.Id.at 2 (quoling Staff Comments at 4,AVU-G-11-03).
ICL “urges the Commission to make a policy decision about how to account for
[forecasting future DSM expenses]in setting the appropriate rider level.”Id.at 3.ICL
“supports the current practice of looking beyond next year to ensure adequate funding for two
years of DSM activities.”ICL recommended “the Commission affirm its prior decision [in
Order No.32366]to set the rider level based on two years of future program needs.”ICL
proposes the Commission do this by tying the rider level to the biennial conservation plans that
Avista produces for the Washington jurisdiction.Id.at 3.
ORDER NO.32652 5
DISCUSSION AND FINDINGS
The Idaho Public Utilities Commission has jurisdiction over Avista,a combination
electric and natural gas utility,pursuant to the authority granted by Title 61 of the Idaho Code
and the Commission’s Rules of Procedure,IDAPA 31.01.01.000.We have reviewed the record
in this case,including the Application and comments.Based on that review,we find it is just,
fair,and reasonable for the Company to decrease the electric energy efficiency rider,
Schedule 91,by 1.3%of billed revenue effective October 1,2012.
We find that it was reasonable for the Company to forecast the rider balance using
a single test-year,and we decline to require the Company to base its projections on two years
of data.We also find that decreasing the rider will not prevent the Company from pursuing all
cost-effective DSM,especially where,as here,the rider balance is twice as much as the
Company says it needs to fund expected DSM operations.We are concerned that allowing rider
funds to accumulate could undermine customers’confidence that their rates are prudently used to
fund cost-effective programs.We find it would not be prudent for the Company to retain rider
funds for which it has no existing or projected use.
We support and encourage utilities to pursue all cost-effective DSM.Thus,we expect
Avista to continue reviewing cost-effective DSM programs,and to implement new programs or
expand existing programs as appropriate.Further,if the new rider rate proves insufficient to
fund cost-effective DSM expenditures,we expect the Company (or others)to bring the matter to
our attention.
Lastly,in light of the declining customer participation in the Company’s rider-funded
programs,we find it reasonable to direct the Company to file a report with the Commission,
within 60 days of the service date of this Order,advising us about the opportunities the Company
believes exist for increasing customer awareness about energy efficiency issues and the
Company’s energy efficiency programs.
ORDER
IT IS HEREBY ORDERED that the Company’s Application is granted,as set forth
in the body of this Order.The Company may decrease the electric energy efficiency rider,
Schedule 91,by 1.3%of billed revenue effective October 1,2012.
IT IS FURTHER ORDERED that the Company shall file a report with the
Commission,within 60 days of the service date of this Order,advising us about the opportunities
ORDERNO.32652 6
the Company believes exist for increasing customer awareness about energy efficiency issues
and the Company’s energy efficiency programs.
TI-ITS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)may petition for reconsideration within twenty-one (21)days of the
service date of this Order.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of September 2012.
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/,/(W/—
PAKJLLANDER,ItRESTDENT
MACK A.REDFORD,COMMISSIONER
ARSHA H.SMITH,COMMISSIONER
ATTEST:
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Jean D Jewell
Cdrhmission Secretary
O:AVU-E-I 2.07 kk2
ORDER NO.32652 7