20140812Folsom Direct.pdf

DAVTD .J. MEYER
VTCE PRESIDENT AND CHIEF COUNSEL OF
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1-4LL EAST MISSION AVENUE
SPOI(ANE, WASHINGTON 99220 -3727
TELEPHONE: [phone]L5
EtvlAIL : david.
BEFORE THE IDAIIO PI'BI.IC UTII,ITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR A
FINDING OF PRUDENCE FOR 2OL3
EXPENDITI'RES ASSOCIATED WITH
PROVIDING ELECTRIC AI{D NATURAL GAS
ENERGY EFFICIENCY SERVICE IN THE
STATE OF IDA}IO
cAsE NO. AW-E- 14-01
CASE No. AVtl-G- l4-O>
DIRECT TESTIMONY
OF
BRUCE W. FOLSOM
FOR AVISTA CORPORATION
(ELECTRIC AIVD NATURAL GAS)
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I.INTRODUCTION
O. P1ease state your narne, employer and business
address.
A. My name is Bruce Folsom. I am employed by
Avista as Director, Products and Services. My business
address is East L411 Mission Avenue, Spokane, Washington.
A. Would you pleaae describe your education and
business experience?
A. I graduated from the University of Washington in
1-979 with Bachelor of Arts and Bachelor of Science
degrees. I received a Masters in Business Administration
degree from Seattle Unj-versity in 1,984.
I joined the Company in 1993 in the State and Federal
Regulation Department. My duties included work associated
with tariff revisions and regulatory aspects of integrated
resource planning, demand side management, competitive
bidding, and emerging issues. In 2002, I was named the
Manager of Regulatory Compliance which added
responsibilities such as implementing the Federal Energy
Regulatory Commission's major changes to its Standards of
Conduct rule. I joined the Customer Solutions Department
in September of 2006 and was the Dj-rector of Energy
Efficiency Policy throughout 201,3, the period of requested
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findings in this case. I began my current duties in July
of 201-4.
Prior to joining Avista, I was employed by the
Washington Utilities and Transportation Commission
beginning in 1984, and then served as the Electric Program
Manager from 1990 to February, 1-993. From a979 to l-983, I
was the Pacific Northwest Regional Director of the
Environmental Careers Organization, a national, private,
not- for-prof it organization.
a. V{hat is the scope of your testimony in this
proceeding?
A. I will provide an overview of the Company's
recent Idaho DSM portfolio results and expenditures for
elecEric and natural gas efficiency programs. I address
Avista's involvement with the Northwest Energy Efficiency
Alliance (NEEA), provide an update on the Company's
university research and development activities and, status
of the Companyrs suspended natural gas DSM programs,
overall evaluation by Avista's third-party contractor
("Cadmus"), and opportunities presented for stakeholder
involvement.
This is Avista's second case, seeking
prudence, in a stand-alone manner outside
finding of
a general
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rate case. DSM prudence was a component of general rate
case filings from L995 through 2009. Case Nos. AVU-E-L3-9
and AW-G- l3-2 presented 20L0 through 20L2 energy
efficiency results and expenses, a.s requested by Staff and
stakeholders to be reviewed outside of a general rate
case.
Lastly, I j-ntroduce the other Company witnesses in
this case.
O. Do you Eponsor exhibits?
A. Yes, I present two exhibits. Exhibit No. 1-,
Schedule 1 is a summary of 201-3 research and development
projects, funded by the DSM tariff rider. Exhibit No. 1-,
Schedule 2 is Avista's 201,3 Annual Report-Demand-Side
Management, Idaho. This includes a summary of DSM energy
savings and levelized costs; a summary of electric DSM
cost-effectiveness; and a summary of natural gas DSM cost-
effectiveness.
II. OVERVIEW OF DSM PROGRAI{S AI{D CURREIflT ISSUES
O. WouLd you please provide a brief overview of
AviEta'e DSM programs?
A. Yes. Avista has continuously offered energy
efficiency services since 1978. This is the twentieth year
of the DSM tariff rider, a distribution charge to fund DSM
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that is now replicated in many other states. Schedule 9L
currently has a rate egual to 2.7* of retail revenue for
electric service and the Schedule l-91 rate is 0.0? of
retail revenue for natural gas.
As will be described by Company witness Mr. Drake,
the Company's programs are delivered across a ful1
customer spectrum. Virtually all customers have had the
opportunity to participate and many have directly
benefited from the program offerings. A11 customers have
benefited through enhanced resource cost-efficiencies as a
result of this portfolio approach.
a. Vlhat were the Company's energy ef f iciency
targete and resulte for 2013?
A. The Company's energy efficiency targets are
established in the process of developlng the Electric and
Natural Gas Integrated Resource Plans (fnps). The targets
derived through the resource planning efforts provide a
startj-ng point for program planning which is accomplished
through the annual business planning process where program
of f erj-ngs are optimized for the Company's service
territory based on current economic and market conditions.
The results of Avista's energy efficiency programs
contj-nue to exceed the targets established as part of this
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IRP process, as shown in Table No. 1 below. Idaho energy
efficiency savings for 201-3 were 25,899 fi-rst-year MWh.
This represents 135? of the Company's IRP target of l-9,009
MWh for this period.
Table No. 1
Type of
Reported Savings
201,3
MWh Savinqs
20]-3
fRP Target
Percent
Achieved
Gross 25 ,899 l_9, 009 L36*
Net 21,,999 n/a n/a
The above table reflects that the fdaho Commission
has hj-storically requested that "net savingrs" be provided
in addition to "gross savJ-ngs." Net savings are the total
(or gross) savings less what customers would 1ike1y have
done without a utility offering energy effj-ciency
programs. The tt11/ 4tt is shown in Table l- because Avista
does not have targets on a net basis. Exhibit No. 1-,
Schedule 2 is Avista's 20L3 Annual Report-Demand-Side
Management, Idaho and provides substantial detail in
support of the above figures.
Over 189 aMW of cumulatj-ve savings have been achieved
through Avj-sta's energy efficiency efforts in the past
thirt,y-six years - of which 1,22 aMW of DSM is currently in
place on the Company's system, with approxj-mately 36 aMW
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in our Idaho servj-ce territory. Current Company-sponsored
conservation reduces retail loads by 10.5 percent.
In November of 20L2, Avista suspended its Idaho
natural gas programs because they were not cost-effective
under the total resource cost (TRC) test, due to 1ow
natural gas avoided costs. Legacy (or previous projects
with carry-over to 201,3) savJ-ngs and savings from electrj-c
projects that had corresponding natural gas savings (but
with no natural gas efficiency cost) in 201-3 were 51-,7'72
therms, Ers reported by Cadmus. (This is shown in Avista's
Annual Report as 51-,774, due to rounding a series of line
items. )
O. $lhat waa
acquisitions?
the cost of these efficiency
A. During 20L3, the Company spent $7.634,864 on
Idaho electric and natural gas DSM programs, of which 642
was paid out to customers in direct incentives pursuant to
the cost-effectiveness tests shown in Exhibit No. 1-,
Schedule 2, page 32. This percentage does not include
additional benefits such as technical analyses provided to
customers by the Company's DSM engineering staff.
O. Do the 20L3 results reflect Avista's
participation in regional energy efficiency efforts?
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A. Yes. The numbers reported include 4,542.8 MWh
of first-year Idaho savings acquj-red through Northwest
Energy Efficiency Alliance's (NEEA) regional efforts.
NEEA focuses on using a regional approach to obtain
electric efficiency through the transformation of markets
for efflciency measures and services. Avista has been a
member of the NEEA, and actively involved in its
governance, since the creation of that organization in
1996. As one of fourteen funders, Avista is supportive of
the use of a coordinated regional market transformation
effort to the extent that the effort is a cost-effective
enhancement of, or alternatj-ve to, local utility efforts
at acquiring those resources for our customers. Avista has
committed to NEEA's next funding period of 2015 through
20L9, opt j-ng in for all NEEA initiatives.
The levelized cost of resources acquired through
Avj-sta's Idaho participation j-n NEEA was 1.8 cents per
kwh. This compares with $141 per first-year MWh for
Avista-funded 1oca1 energy efficiency programs in Idaho.
During 201,3, Avista's Idaho-related NEEA funding was
$8ol-, 838 .
O. In Case Nos. AVt -E-13-9 and AVt -G-L3-2, the
Commission Staff made a series of recommendations that
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were adopted in Order No. 33009. Would you pleaae provide
a brief update?
A. Yes. On March 6, 201,4, the Commiss j-on Staf f
filed comments, including recommending the following:
1. Approve $25,1,72,700 as prudently incurred expenses
for the years 2010 -201,2. This amount consists of
5l'9,827,396 in Idaho electric tariff rider expenses
and $5,345,304 in ldaho gas tariff rider expenses.
2. Dj-rects Avista to identify and establish a central
decision maker for DSM policy and procedures. fn
response to this recommendation, t,he Company
announced that Dan Johnson was named Sr. Manager of
Energy Efficiency. Mr. ,Johnson has been with Avista
since October 2010 when he was hired as the Smart
Grid Project Manager for the Pullman demonstration
project. Most recently, h€ has been in the role of
Manager of Project Management and Construction
Contracts in Generation Production and Substation
Support. He received his Bachelor's Degree in Civil
Engineering from the UnJ-versity of Washington and his
Master's in Engineering Management from Portland
State Uni-versity. He came to Avista from the Spokane
International Airport where he was the Director of
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Engineering and Planning. Under
leadership, the DSM organj-zation
integrated.
.Johnson's
be fu11y
3. Defers recovery of Lewis and Clark State College and
Office of Energy Resources (OER) project incentives
until Avista's next prudency filing to provide the
Company an opportunity to obtain purchase and labor
invoj-ces and verify installation of all funded
projects. As dj-scussed in more detail in Company
witness Mr. Drake's testj-mony, the Company believes
it has gathered all available and relevant
documentation to support prudency of both the OER and
LCSC projects.
Avj-sta filed reply comments on March 19, 2OL4
supporting Commission Staff's recommendation and committed
to filing a status report describing how the Company has
addressed concerns raised in their comments.
Avista subsequently submitted a Status Report
responsive to the above on ,June 26 , 20L4.
O. Please provide an update on Avista,s regearch
and development work with Idaho univergities.
A. On August 30, 2013, AvJ-sta filed a request with
the Commission to authorize up to $300,000 per year of
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Schedule 9A, DSM Tariff Rlder revenue to fund applied
research at Idaho's universities through a I'ca11 for
papers" approach. The intent of this initiative is to
supplement the pipeline of emerging technology. The
Commission approved this request in Case No. AW-E-13-08
on October 30, 20L3. Sixteen projects were submitted.
Four were selected; three from the University of Idaho and
one from Boj-se State University. This is summarized in
Exhibit No. 7-, Schedule 1.
O. What is the status of the Idaho electric and
natural gas tariff rider balances?
A. At December 31, 201,3, the Idaho electric and
natural gas tariff rider balances were $3,459,1-89
underfunded (i.e. dollars expended exceeded dollars
collected through the Tariff Rider) 1 and i674,0592
overfunded, respectJ-ve1y.
O. Due to low natural gas avoided costs, Avista
suspended its natural gas energy efficiency progrErms by
Commission deciEion effective September L, 20L2. Does the
' The tariff rider adjustment is set to recover the und.erfunded bal-ance
over a two-year period.
' The Parties to the sett,lement agreement in the Case Nos. AVU-E-I-4-05and AVU-G-14-01 have proposed that the natural gas tariff rider
balance be refunded to customersr per the terms of the proposed
settlement agreement.
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Company have plans to consider bringing theee progrErms
back?
A. Yes. Avista intends to propose an offering of
natural gas efficiency programs in Idaho when the cost-
effectiveness is "favorable" as measured by the total
resource cost (TRC) test. Avista will monitor the
quarterly weighted average cost of gas (WACOG) relative to
the prevailing WACOG when Schedule 191- was suspended, as a
proxy for avoided cost. Currently, the June 201-4 WACOG of
$0.41 per therm remains insufficient for the Company to
field a cost-effective 1oca1 portfolio.
a. Please describe the opportunity for external
review of Avistars DSM activities.
A. The Company has had continuous energy efficiency
stakeholder involvement since 1-992. The Company's program
offerings, planning, evaluation findings, underlying cost-
effectiveness tests and results are reviewed durJ-ng
stakeholder meetings. Currently, the Company holds in-
person meetings at least twice per year, hosts several
webinars annua11y, provides a fuII analysis of the results
of DSM operations on an annual and monthly basj-s,
identifies (with appropriate precautions for customer
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confidentiality) large projects and provides a quarterly
newsletter summarizing recent DSM activlties.
Avista appreciates the active engagement of the
Commission Staff as part of our Energy Efficiency Advisory
Group. Additionally, the Snake River Al1iance, the
Northwest Energy Coalition, University of Idaho Integrated
Desi-gn Lab and the Northwest fndustrial Gas Users have
representation on Avista's Advisory Group.
III. PRT'DENCE OF INCI'RRED DSM COSTS
O. Would you please explain the Company'e request
for a finding of prudence in this case?
A. Yes. Idaho electric programs have been cost-
effective from both Total Resource Cost (TRC) test and
Program Administrator Cost (PAC) test perspectives. The
2013 TRC benefit-to-cost ratio of 1-.23 for the Idaho
electric DSM portfolio is cost-effective, with a residual
TRC benefit to customers of over $2.1 mi1Iion. The PAC,
also known as the Utility Cost Test (UCT), benefit-to-cost
ratio during 201,3 was 1.85, with a residual PAC benefit of
nearly $5.3 million. These are summarized in Exhibit No.
L, Schedule 2, page 5.
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The natural gas portfolio was suspended in 2013 and
the costs and benefits shown in Exhibit No. 1-, Schedule 2
are residual from the pre-20L3 period.
The Company requests that the Commission issue a
finding that electric and natural gas energy efficiency
expenditures from January 1-, 20L3 through December 3A,
2Ol3 were prudently incurred.
O. Please gummarize the Company's energy
efficiency-related eavings for this period?
A. The Company's tariff riders under Schedules 9L
(electric) and 191 (natural gas) are system benefit
charges to fund energy efficiency.
From ,January 1-, 201-3 through December 3A, 207-3 ,
25,899 MWh, on a gross basis, and 51,772 therms of first-
year efficiency savings were achieved. Pages 5 through l-1
of Exhibit No. 1-, Schedule 2 detail the energy savings by
regular and 1ow-income portfolios for both electric and
natural gas DSM programs.
O. Vlhat evaluation of the Companyr s DSM programa
have occumed?
A. Cadmus performed independent (or "third-party")
impact and process evaluation on Avista's DSM programs for
the 20L3. Impact evaluation is intended to verify, and
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adjust as necessary, "claimed'r savings. Process
evaluation reviews "procedures" for continual improvement.
Witnesses Mr. Drake and Dr. Khawaja describe the results
of this work in detail.
A. Can you please sunmarize Avigta's request in
this case?
A. Yes. The Company reguests a finding that the
expenditure of tariff rider revenue has been reasonable
and prudent. A portfolio of programs covering all
customer classes has been offered with gross savings of
25,899 MWh and 51-,7-12 therms during January 1-, 20L3
through December 31, 201,3. The 201,3 TRC benefit-to-cost
ratio of 1,.23 for the electric DSM portfolio is cost-
effective. The natural gas portfolio was suspended in 20L3
and the costs and benefits shown in Exhibit No. 1-,
Schedule 2 are residual from the pre-201,3 period.
The Tariff Rider funded programs have been
successful. Participating customers have benefited through
lower bills. Non-participating customers have benefited
from the Company having acguired lower cost resources as
well as maintaining the energy efficj-ency message and
infrastructure for the benefit of our service territory.
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IV. OTHER EOMPAITY WITNESSES
A. Would you please provide a brief sunmary of the
teetimony of the other witnesees representing Avista in
thig proceeding?
A. Yes. The followj-ng additional witnesses are
presenting direct test,imony on behalf of Avi-sta:
Chris Drake, Manager of Demand Side Management
Program Delivery, will describe Avj-sta's energy efficiency
program offerings available to Idaho customers in 201-3,
and program management perspectives. Mr. Drake will also
respond to Evaluat j-on, Measurement and Verif j-cation
findings and Cadmus recommendations specific to
implementation issues .
Dr. Sami Khawaja, Executive Consultant, The Cadmus
Group, will present the results of third party
verificatj-on of Avista's 201,3 DSM electric portfolio. Dr.
Khawaja will describe the methodology and conclusions of
his company's independent impact evaluations and process
evaluations that are a central component of Avista's EM&V
Framework and EM&V P1an. His testimony concludes that
Avista's Idaho electric DSM programs achieved 25,899,345
kwh in 201,3 and an explanation of the 51-,772 therms of
natural gas savings.
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A. DoeE that complete
testimony?
A. Yes, it does.
pre- fited direct
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