20141121Comments.pdf

KRISTINEA. SASSER iif r;;.t, "
DEPUTY ATTORNEY GENERAL
IDAHO PUBLTC UrrLrTrES COMMTSSTON 2[j ii l,lcv 2 I Pi{ I : 55
PO BOX 83720
BOISE,IDAHO g3720-0074 lir.iili-' i' I , .
(2os)334_0357
tLv-vvt- iiTllil;;:s ii,.. .' j-r.,iu,.
BAR NO. 6618
Street Address for Express Mail:
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
AVISTA CORPORATION FOR THE REQUEST ) CASE NO. AVU-E-14-10
TO USE AVAILABLE F'UNDS FROM )
SCHEDULE 95 TO PROMOTE ROOFTOP ) COwTMENTS OF THE
SOLAR INTALLATIONS ON COMMERCIAL ) COVTMISSION STAFFBUILDINGS. )
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attomey of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice
of Application and Notice of Modified Procedure issued in Order No. 33 I 5 1 on October 14,
2014, in Case No. AVU-E-14-10, submits the following comments.
BACKGROUND
On September 18, 2014, Avista Corporation dba Avista Utilities, filed an Application
with the Commission requesting revisions to its Schedule 95-Optional Renewable Power Rate.
The Company seeks to use available/surplus funds from Schedule 95 to promote grants for
rooftop solar installations, 20 kW or smaller, on commercial buildings in Idaho. Avista requests
that the revisions become effective November 14,2014. The Commission suspended the
proposed effective date in order to allow adequate time to review the Application. See Order
No.33151.
STAFF COMMENTS NOVEMBER2I,2OI4
Avista states that it is a proponent of utilizing a variety of energy resources, as well as
offering energy efficiency measures, to provide safe and reliable service to its customers. The
Company's Schedule 95-Optional Renewable Power Rate-allows customers to purchase
blocks of renewable power. In furtherance of this objective, the Company would like to expand
the awareness of renewable energy generation options, specifically by funding locally-owned,
commercial solar, using funds from its current Schedule 95.
Since 2002, Avista has offered electric customers the opportunity to voluntarily support
the development of renewable energy by participating in the Company's Buck-a-Block program
under its Schedule 95. Avista's wind power option was priced in increments, or "blocks," of
$1.00. Each $1.00 block of wind purchased by customers equaled 55 kilowatt hours (kwh).
In 2004, the Company filed revisions to its program. Avista modified the program from
an optional wind power rate to an optional renewable power rate. Avista states that these
revisions also reflected a lower wholesale cost of wind power to Avista, and represented the cost
of renewable energy certificates (RECs) associated with the renewable resource. The RECs were
primarily from wind power generated at the Stateline Wind Energy Center, but could also come
from other "Green-e certified" resources. The revised program continued to include voluntary
participation in increments of $1.00 per block. However, blocks were modified to represent 300
kWh of renewable energy as opposed to the previous 55 kwh. Avista explains that this created
an opportunity to enhance the Buck-a-Block program. Presently, this voluntary program
continues to allow customers the choice to purchase a "block" of renewable power equal to 300
kWh that is produced through regional projects for $1.00 a block.
According to Avista, approximately 3,500 customers purchased nearly 227,000 blocks
(68,000 MWh) in20l3. All of the costs and benefits stay within the program. The Buck-a-
Block program requires regular program administration, promotion, and communication with
customers. The intent of the program is to continually match funds collected with the annual
program costs while balancing the need to collect enough funding to meet potential growth and
potentially higher priced RECs. However, due to the availability of low-cost RECs in recent
years, and a plateau in subscription levels, it has resulted in surplus revenues that exceed the
costs by approximately $200,000. This has prompted the Company to explore additional ways to
promote and acquire additional renewable energy for the program.
The Company proposes to use, when available, any available funds from Schedule 95 to
promote grants for rooftop solar installations, 20 kW or smaller, on commercial buildings in the
STAFF COMMENTS NOVEMBER2I,2OI4
Company's service territory in Idaho and Washington. Successful grant recipients would agree
to allow their installation to be made available for the education of its building occupants and
members of the community on the merits of solar energy generation and the Buck-a-Block
program. Preference for grant recipients would be given to school districts and buildings where
the visibility of the installation will have the greatest impact for both educational purposes as
well as solar energy generation. Geographic distribution throughout the Company's service
territory will also be considered as part of the evaluation.
Avista estimates that the existing $200,000 surplus would fund the installation of 6-8
small projects (5kW or less) or 2 larger projects (20kW or less).r After application and
screening, grant recipients would be awarded partial or full funding that could fund the cost of a
rooftop solar installation, not to exceed $70,000 per site. Costs and risks associated with a site
feasibility or assessment study, labor, and contracting costs related to the installation, and
ongoing maintenance will be the responsibility of the grant recipient.
STAFF REVIEW
Staff reviewed the Company's Application to determine the impact that the proposed
changes would have to the Buck-a-Block program participants and to ratepayers, in general. In
2013, the Company collected $229,003 in Schedule 95 funds. According to the Company, the
Buck-a-Block program currently has a surplus of $200,000, and will accrue an additional
$150,000 to $200,000 surplus by the end of its 2016 fiscal year (Avista Response to Production
Request No. 8). Thus, this surplus represents a substantial, and increasingly large, share of
Buck-a-Block program funds. The Company estimates that about 22.4% of this would be
collected from the Idaho jurisdiction (Response to Production Request No. 7), for a total of
between $78,400 and $89,600.
Staff notes that rooftop solar energy enjoys broad support throughout the Company's
service area. The State of Washington, in particular, offers generous incentives for solar power
production. For example, under the Washington State Renewable Energy Production Incentive
program, residents and businesses can qualify for incentives of between $0.12 and $0.54 per
kilowatt hour (kWh) of photovoltaic energy, with the largest incentives paid to program
participants who install equipment manufactured in the State of Washington.
' Future costs may vary based on market conditions, the size of the installation, and where the equipment is
manufactured.
STAFF COMMENTS NOVEMBER2I,2OI4
Notwithstanding its popularity, solar energy constitutes only a small fraction of the
renewable energy certificates (RECs) purchased by the Buck-a-Block program. According to
Avista's 20 1 3 Integrated Resource PIan (IRP), solar energy accounte d for 0 .2o/o of Buck-a-Block
RECs, with the balance obtained from wind (85%) and biomass (14.8%). In 2013, all solar
energy RECs were derived from the Company's l5 kW Rathdrum Prairie Solar Project. The low
solar utilization rate can be explained by the high cost of producing solar energy relative to other
sources. Avista's Buck-a-Block program website states that solar energy costs the Company
$0.35lkwh more than wind energy to produce.
According to its 2013 IRP, Avista's 190 net-metered customers had a total capacity of 1.1
MW, or about 0.5% of Avista's name-plate generating capacity. Eighty-three percent of the
energy obtained from net-metered customers was derived from solar energy, with most of the
balance derived from wind and biogas systems. The Company noted that 80Yo of its net-metered
installations are in Washington.
In its 201 3 IRP, the Company predicted that the number of net-metered customers will
increase by approximately 40 per year. The Company further opined that this growth is due,
primarily, to generous state and federal subsidies and tax incentives, mostly in Washington.
According to the Company, customer produced solar energy costs approximately $0.80/kWh.
Federal Investment Tax Credits and favorable depreciation rules can reduce a customer's net cost
up to $0.421kwh. This, coupled with up to $0.54lkwh from the aforementioned Washington
State Renewable Energy Production Incentive Program, permits Avista's net-metered customers
in Washington to profit from govemment subsidies and incentives alone. Avista's Net-Metering
Option, Schedule 63, effectively permits customers who generate their own power to sell surplus
power to Avista at retail cost. This pricing scheme does not permit Avista to fully recover fixed
costs associated with net-metered customers. Avista has estimated the unrecovered fixed costs
associated with solar power systems that would be funded by the proposed Buck-a-Block
modification to be $2,453 per annum on a system basis (Avista Response to Production Request
No. 9). Typically these costs would be borne by Avista's ratepayers.
Staff is cognizant of the shift in fixed costs from net-metered customers to the rest of the
customer base and is concerned about the potential subsidies. If the program were to experience
significant growth, the cost-shift could begin to impact rates. However, the level of uncollected
fixed costs associated with this proposal would have little to no impact on customers' rates.
STAFF COMMENTS NOVEMBER 2I ,2014
Given the potential to shift fixed cost recovery to other customers, Staff believes the
Commission should monitor the growth of the program.
Staff notes that Avista's electric demand has historically peaked during the winter when
solar energy generation, whether generated by Avista or by its customers, is at its lowest point.
However, in recent years, additional air-conditioning load coupled with warmer winters has
created summer peak demand that has been greater than its winter pe4k. As Avista becomes
more of a dual-peaking utility, additional rooftop solar installations may help Avista reduce some
of its demand-related costs.
Staff is aware that Buck-a-Block money and expenses are not shouldered by the
Company's general ratepayers, but by voluntary contributions from customers interested in
supporting renewable energy. Because of its voluntary nature, customers may enroll or drop out
of the program at any time. Though the Company's proposal is consistent with the intent of the
tariff, there is at least one aspect of the Company's proposed Schedule 95 modification that is
troubling. According to the Company's Application, the estimated costs of solar panels produced
in Washington State are three times the costs of solar panels produced elsewhere. Avista
explained that Washington's incentive programs would more than offset this cost (Avista
Response to Production Request No. 1). However, incentive money would be recouped by the
system owner, and not by Avista's ratepayers or by Buck-a-Block participants.
Given Washington State's generous incentive programs, it is possible that a
disproportionate amount of equipment could be manufactured and installed in Washington,
where Buck-a-Block money will purchase only one third as much renewable energy as could be
produced by equipment manufactured and installed elsewhere. For Idaho ratepayers, this
concern could be ameliorated if Avista were to grant money in proportion to the amount of
program money collected from each jurisdiction. Avista has indicated its willingness to do so.
When asked if the Company considered increasing block size, the Company indicated
that it felt that the current block size of 300kWh was optimum. The program has consistently
been in the top five lowest premiums for programs of this type in the nation, and the Company
believes that increasing the size of the blocks would not be very meaningful. Given the excess
funds projected for the program through 2016, if the Company were to increase the block size,
Staff estimates that a block size of between 375 kWh and 425 kwh would allow the program to
remain revenue-neutral, absent any other action.
STAFF COMMENTS NOVEMBER2I,2OI4
Though increasing the block size is a simple approach to spend the surplus funds, it might
not add much value to the program. Including an additional solar component might fuither the
goal of increasing awareness of alternative energy resources. In addition to increasing
community exposure to solar energy, the proposed changes would also provide educational
opportunities for the community. Because of the relative infancy of solar generation, along with
its rapidly emerging technology, the Company believes that a project funded with surplus
Schedule 95 funds is a reasonable way of providing not only value under the original intent of
the tariff, but additional opportunities for interested parties to gain first-hand knowledge of
photovoltaic systems. Avista stated that preference for grant recipients would be given to school
districts and buildings where the visibility of the installation will have the greatest impact for
both educational purposes as well as solar generation. Successful grant recipients would agree to
allow their installations to be made available for the education of its building occupants and
members of the community. Staff believes these benefits have value that outweighs other
program concerns at this time.
As of November 20, 2014, all five of the individual customers providing comments
supported the Company's proposed Buck-a-Block program changes. None of those who
commented stated whether or not they participated in the program.
STAFF RECOMMENDATION
Based on the growing surplus of 'oBuck-a-Block" funds, Staff recommends that the
Commission accept the Company's Schedule 95 proposal with modifications. (1) Staff
recommends that the Commission condition its approval on the Company's commitment to
disburse grant money in proportion to the amount of Schedule 95 money collected from each
jurisdiction. (2) Staff also recommends that the Company be required to expand its annual
Schedule 95 report beginning with the 2015 reporting year. In addition to the financial
information the Company already provides, the Company should include expenses and benefits
for each installation, including a description of the educational and research benefits actually
observed, to assist the Commission in determining the additional value provided by the program
changes. This additional reporting will allow the Commission to monitor the impact of using
Schedule 95 surplus funds to promote the Company's community solar initiative. It will also
ensure that uncollected fixed cost recovery from grant recipients does not materially impact
customer rates.
STAFF COMMENTS NOVEMBER2I,2OI4
Respecttully submitted this Ll{ day ofNovember 2014.
Technical Staff: Donn English
Mike Morrison
i:umisc:commcntdevucl4. l0larps comrnents
Deputy Attorney General
STAFF COMMENTS NOVEMBER 2I,2014
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 2I't DAY OF NOVEMBER 2014,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF TO
AVISTA CORPORATION, IN CASE NO. AVU-E-14-10, BY E-MAILING AND
MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE FOLLOWNG:
DAVID J MEYER
VP & CHIEF COTINSEL
AVISTA CORPORATION
PO BOX 3727
SPoKANE W A 99220-3727
E-MAIL: [e-mail]
LINDA GERVAIS
MGR REGULATORY POLICY
AVISTA CORPORATION
PO BOX3727
SPoKANE WA99220-3727
E-MAIL: linda. [e-mail]
CERTIFICATE OF SERVICE