20170602final_order_no_33769.pdf

Office ofthe Secretary
Service Date
June 2,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF APPLICATION OF )
AVISTA CORPORATION FOR A FINDING )CASE NO.AVU-E-16-06
OF PRUDENCE FOR 2014-2015 )
EXPENDITURES ASSOCIATED WITH )
PROVIDING ELECTRIC ENERGY )
EFFICIENCY SERVICE IN TUE STATE OF )ORDER NO.33769
IDAHO )
On September 14,2016,Avista Corporation dba Avista Utilities applied to the
Commission requesting an Order finding that the Company prudently incurred $9,999,742 in
electric energy efficiency expenses in Idaho from January 1,2014 through December 31,2015.
The Company is not requesting a change to rates at this time.The Commission issued a Notice
of Application and set deadlines for intervention.See Order Nos.33617,33644,and 33712.The
Idaho Conservation League (ICL)and the Community Action Partnership Association of Idaho
(CAPAI)intervened as parties.See Order No.33636.The parties conferred and recommended a
schedule to the Commission,and the Commission issued a Notice of Modified Procedure and a
schedule for filing comments.1 Order Nos.33644,33693 and 33712.Commission Staff,CAPAI
and one member of the public timely submitted comments,and the Company timely filed a
reply.CAPAI also timely filed a Petition for Intervenor Funding.
After thoroughly reviewing the record,we issue this Order finding that the Company
prudently incurred $9,721,985 in electric energy efficiency expenses.We also grant CAPAI’s
Petition for Intervenor Funding.
APPLICATION
The Company’s filing consisted of testimony and exhibits from two witnesses and a
cover letter.The Company filed a supplemental Application on September 16,2016
(Application).In addition,on January 26,2017,the Company filed an Amended 2014 DSM
Annual Report,part of Johnson Direct,Exhibit 1 (Amended 2014 DSM Annual Report).The
Application,including the supporting testimony,described the Company’s energy efficiency
activities,its expenditures on those activities,and their cost-effectiveness.The Company stated
The Commission originally set deadlines of January 31,2017 and February 21,2017,for comments from parties
and the public,and the Company’s reply,respectively.Order No.33644.Upon a Motion by Commission Staff,the
Commission later revised the deadline for comments from parties and the public to March 30,2017,and for any
reply comments from the Company to April 14,2017.Order Nos.33693 and 33712.
ORDER NO.33769 1
that its energy efficiency programs are based on providing a financial incentive,or rebate,for
cost-effective efficiency measures taken by customers.Application at 2.The Company
provided information to customers about the rebates it offers through a variety of forums:
broadcast media,on-line,radio,and print advertising,and its website,which also provides on
line energy analysis tools.Id.In addition,the Company provides direct outreach,such as
workshops and outreach from Company representatives,for residential and non-residential
customers.Id.at 3.For residential customers,the Company offers standard programs for
rebates,where customers purchase and install energy efficient equipment and measures and
submit a rebate application.Johnson Direct at 6.For non-residential customers,the Company
offers standard programs or customized,site-specific programs.Id.at 8.The standard measures
use rebates to incent relatively uniform measures and applications.Id.The site-specific
programs evaluate a customer’s specific site to propose cost-effective commercial and industrial
energy efficiency measures tailored to the building or process operation.Id.at 8-9.The
Company stated that virtually all customers have had the opportunity to participate in the DSM
programs and that many have directly benefited from the program offerings.Id.at 3.The
Company further stated that all customers have benefited from enhanced resource cost-
effectiveness due to the DSM portfolio approach.Id.
The Company also helps fund the activities of the Northwest Energy Efficiency
Alliance,which is an organization that focuses on “using a regional approach to obtain electric
efficiency through the transformation of markets for efficiency measures and services.”
Application at 3.The Company stated that these programs provide resource acquisition
opportunities “that would otherwise be either unachievable or more costly in the absence of
regional cooperation.”Id.
In addition,the Company provides about $700,000 annually for low-income
weatherization assistance and $50,000 annually for conservation education in Idaho.Id.The
program is administered by local community action agencies in its Idaho service territory.Id.
In total,the Company spent $9,999,742 on Idaho electric DSM programs during
2014-2015.Johnson Direct at 11.
The Company explained that targets for energy efficiency are set in its Integrated
Resource Planning (IRP)process.Johnson Direct at 3.The Company compared its energy
efficiency results for 2014 and 2015 to the IRP targets for those years.For 2014,the Company’s
ORDER NO.33769
energy efficiency savings of 16.292 MWh exceeded the target of 1 5,330 MWh.Id.at 4.For
2015.the Company’s savings of 14,789 MWh were less than the target of 15.666 MWh.Id.
Over the combined 2014-2015 period,the savings of 31,081 MWh met the target of 30,996
MWh.Id.
The Company explained that it evaluates the cost-effectiveness of its energy
efficiency programs through two tests—the Total Resource Cost (TRC),and the Program
Administrator Cost (PAC)test,also known as (and referred to here as)the Utility Cost Test
(UCT).Id.at 15.The TRC test evaluates benefits and costs considering the entire utility
ratepayer population and the UCT evaluates benefits and costs from the perspective of achieving
a minimization of the utility cost of delivering energy efficiency services.Amended 2014 Idaho
DSM Report at 1-2.Ratios in excess of 1.0 indicate that benefits exceed costs.Id.The
Company stated that its programs have been very successful and that they are cost-effective from
both a TRC test perspective and a UCT test perspective.Johnson Direct at 15.The Company’s
TRC and UCT results are described in Exhibit I to the direct testimony of Company witness
Johnson and are summarized below.
2014 2015
TRC benefit-to-cost ratio 1.76 1.29
Residual TRC benefit to customers Over $6.0 million Over $2.4 million
UCT benefit-to-cost ratio 3.22 2.39
Residual UCT benefit to customers Nearly $9.1 million Nearly $6.1 million
Table information from Johnson Direct at 15.
The Company stated “[p]articipating customers have benefited through lower bills.
Non-participating customers have benefited from the Company having acquired lower cost
resources as well as maintaining the energy efficiency message and infrastructure for the benefit
of our service territory.”Application at 4.
A consultant,Texant,performed a third-party impact and process evaluation of the
Company’s DSM programs for 20 14-2015.Johnson Direct at 16.The Company explained that
an impact evaluation verifies,and adjusts as necessary,claimed savings.Id.A process
evaluation reviews procedures for continuous improvement.Id.Nexant’s evaluation found that
the Company’s “Idaho electric DSM programs achieved 31,081 MWh in 2014-2015 cost-
ORDER NO.33769 3
effectively and that Avista’s 2014-2015 programs addressed all impact and process evaluation
needs in accordance with industry and regulatory standards.”Id,Nexant’s consultant provided
testimony in this case.See Roy Direct.
In addition,the Company described its efforts to improve the management of its DSM
program.Id.The Company stated that it continues to actively manage and monitor its programs
and focuses on utility best practices for DSM program implementation and oversight.Id.The
Company uses two key principles in its approach to energy efficiency:(1)pursue all cost-
effective kilowatt hours by offering financial incentives for most energy saving measures with a
simple financial payback of over one year;and (2)use the most effective mechanism to deliver
energy efficiency services to customers.Id.at 17.Finally,the Company explained that it is
negotiating with Nexant to purchase and integrate its DSM enterprise software as the single
system of record,which the Company believes will improve its reporting ability and increase
transparency by providing external stakeholders remote access.Id.The Company has been
preparing for the integration by using past business mapping exercises and coordinating with
other regional utilities on potential program templates.Id.
The Company also discussed the status of its electric tariff rider balance and its
stakeholder involvement processes.As of December 31,2015,its electric tariff rider balance
was $431,784 underfunded (dollars expended exceeded dollars collected through the tariff rider).
Id.at 13.Regarding stakeholder processes,the Company explained that it holds in-person
meetings at least twice a year,hosts several webinars annually,provides a full analysis of the
results of DSM operations on an annual and a monthly basis,identifies large projects,and
provides a quarterly newsletter summarizing recent DSM activities.Id.
THE COMMENTS
A.Commission Staff
Staffs comments fall into four general categories:(a)Energy Savings,(b)Financial
Review and Proposed Adjustments to DSM Expenses,(c)Unresolved Concerns from Previous
Cases,and (d)Other issues.
Energy Savings
Staff reviewed the Company’s energy efficiency program results and concluded that
while the programs as a whole were cost-effective in both 2014 and 2015,energy savings
decreased in 2015.The results that year missed the target the Company had set in its Integrated
ORDER NO.33769 4
Resource Plan (IRP).Staff Comments at 2.Staff explained that the most significant shortfall
was in the non-residential energy’efficiency program,especially site-specific and prescriptive
lighting.Id.
Staff further explained that the Company provides monthly e-mail updates regarding
its energy savings,and that Staff noticed in mid-2015 that the Company was not on pace to meet
the IRP target.Id.Staff indicated that it ‘repeatedly brought this to the Company’s attention but
did not receive an engaged response”until after the target had been missed.Id.In July 2016,the
Company provided an analysis of the factors leading to the shortfall and the steps taken to
prevent another occurrence.Id.Staff indicated that the Company’s efforts to improve program
results have led to 2016 energy savings ahead of year-to-date goals at the time of the
Application.Id.at 3.Staff believed the Company should have identified and addressed the 2015
shortfall without Staffs assistance and should be more proactive in addressing such concerns in
the future.Id.
Financial Review and Proposed Adjustments to DSM Expenses
Staff audited the Company’s electric DSM expenditures for 2014 and 2015.Id.Staff
generally supported the Company’s DSM efforts and recommended the Commission approve
$9,721,985 as prudently incurred.This is $277,798 less than what the Company requested.Id.
Staffs recommended adjustments fall into two general categories:adjustments to reflect a more
precise allocation between jurisdictions;and adjustments due to lack of documentation.The
specific adjustments are shown in Table 1 and described below.
Table 1:Staffs Proposed Adjustments to Avista’s Requested
Prudently-Incurred Idaho DSM Expenditures
2014 2015 Sum 2014+2015
Companys Requested Expenses for Prudency Determination $4,708,389 $5,291,394 $9,999,783
.Simple Steps Program $24,739 $(147,339)Staffs proposed adjustments:
•JACO Recycling Program $(11,487)$(13,005)jurisdictional allocation Nexant Evaluation $-$(130,185)
Staff’s proposed adjustments:Corporate Credit Card Charge $(480)$-
lack of documentation Reported Expense Discrepancy $(41)$-
Subtotal:Staff’s Proposed Adjustments $12,731 $(290,529)$(277,798)
Total Staff Recommended Prudently-Incurred Expenses $4,721,120 $5,000,865 $9,721,985
Staffs proposed adjustments based on jurisdictional allocations reflect instances
where the Company had more precise and detailed information available on which to allocate
costs to Idaho or Washington,but did not use it.
ORDER NO.33769 5
Staffs last proposed adjustment related to jurisdictional allocations to Nexant
Consulting’s evaluation fees.In its audit.Staff reviewed several hundred pages of detailed
Nexant invoices and was unable to gain any confidence that Nexant’s jurisdictional billing was
accurate.”StatT Comments at 6.According to Staff,Avista simply booked the costs according
to how Nexant had billed them,rather than reviewing them and allocating them appropriately.
Id.at 7.Staff recommended allocating Nexant’s evaluation costs 20%to the Idaho jurisdiction,
as was done in the last case requesting prudency of DSM rider expenses,Case No.AVU-E-14-
07.Id.This would result in a reduction to 2015 expenses only (Avista began contracting with
Nexant in 2015).Id.at 6-7;see Table 1.Staff noted that further adjustments will be needed in
future prudency determination.Id.
Staff proposed two adjustments due to lack of supporting documentation.Staff
proposed to reduce 2014 expenses by $480 to remove Idaho’s share of a corporate credit card
charge for which the Company could provide no receipts or other documentation,and $41 to
reflect what the Company actually charged to its DSM rider compared to what was listed in the
2014 Annual Report.Id.
Unresolved Concerns from Previous Cases
In the Company’s previous DSM prudency cases,Staff had identified concerns with
the Company’s program implementation,specifically about low realization rates,tariff
compliance shortcomings,and inadequate documentation for incentive payments.Id.at 7.Staff
explained that the Company has adopted changes to its practices to address these concerns,
including a departmental reorganization,and that realization rates for the site-specific program
have significantly improved.Id.at 7-8.However,Staff remained concerned about whether the
issues have been fully resolved.Id.at 8.Staff stated that “the Company’s internal audits,impact
and process evaluations,and annual DSM reports are noticeably less informative”and less
detailed than previous editions.Id.In light of the concerns raised in previous prudency
determinations and evaluations,Staff believed the evaluation could have provided a
comprehensive review.Id.
Staff identified concerns with the Company’s DSM reports—that the reports do not
provide sufficient detail on program operations.Id.at 9.Staff was also concerned that the DSM
annual reports do not accurately portray expenses,energy savings,and the cost-effectiveness of
ORDER NO.33769 6
Idaho programs.Id.Staff identified similar discrepancies in the low-income weatherization
assistance information in the 2015 report.Id,at 10.
Other Issues
Residential Home Energy Reports
Staff explained that the Company has a cost-effective and popular program in which
residential customers are mailed home energy reports each month.Id.The Company
implements this program in conjunction with a vendor,Opower.Id.In 2015,the Company’s
new customer service system did not connect properly to Opower’s software,resulting in the
home energy reports not being generated or mailed to participants.Id.at 10-11.However,Staff
also indicated that the 2015 impact evaluation found that savings were stable even during the
lapse.As a result,Staff stated that “customers were not harmed and the durability of savings
supports the use of a multi-year measure life for cost-effectiveness.”Id.
Conservation Potential Assessment
Staff recommended that Avista use the Utility Cost Test (UCT)as the threshold for
electric cost-effectiveness screening in its Conservation Potential Assessment (CPA).Id.While
Avista has traditionally used the Total Resource Cost test,Staff believes the UCT would be more
appropriate because it better aligns with the method used to value supply-side resources.Id.In
addition,it more accurately represents the value of the resource to the utility and its customers
(although Staff believes that reporting the results for all tests is important).Id.Staff also noted
that Avista has been approved to use the UCT as the cost-effectiveness threshold for its natural
gas DSM programs;using the UCT for the same purpose for its electric program would align the
methodologies.Id.
Summary of Staff’s Recommendations Regarding Prudency Determination
In summary,with regard to the prudency determination,Staff recommended the
Commission order that the Company prudently incurred $9,721,985 in tariff rider funded energy
efficiency expenses for 2014 and 2015.Staff also recommended that the Commission confirm
that the ending balance in the tariff rider account is $153,986 underfunded (meaning customers
owe the Company)as of December 31,2015.
B.CAPAI
CAPAI believes the Company’s low-income weatherization assistance and
conservation education expenditures from 2014 and 2015 were prudently incurred and that the
ORDER NO.33769 7
Company should be allowed to recover these costs.Id.CAPAFs comments were limited to the
Company’s low-income weatherization assistance and energy conservation education programs.
which are both targeted to low-income customers.CAPAI Comments at 1.CAPAI agreed with
changes the Company made to the low-income weatherization assistance program in 2014.
whereby CAP agencies have additional flexibility and access to some funding for additional
weatherization measures.Id.at 2.CAPAT recommended the Company continue to work with
the relevant CAP agencies to develop and implement additional program changes to benefit the
residents of weatherized homes.Id.
CAPAI cited Nexant testimony that the low-income programs are “running smoothly”
and identified no reports of systemic problems with recruitment,communication,or
implementation.Id.CAPAI agreed with these statements in relation to the low-income
weatherization assistance program and recommended that the Company continue to use the
expertise of the CAP weatherization personnel.Id.at 3.CAPAT also agreed with the
Company’s strategies for low-income energy conservation education and recommended that the
Company continue to leverage the trust of CAP and their staff in local communities to further
these efforts.Id.
CAPAI also addressed what it referred to as a currently-effective “moratorium”on
increases in weatherization funding for all three of Idaho’s investor-owned utilities—Avista,
Idaho Power and Rocky Mountain Power.Id.at 4.CAPAI indicated that it has been
approximately five years since the “moratorium”was imposed “as a result of many factors,
including the commission’s adoption of roughly 18 metrics proposed by the Commission Staff in
Case No.GNR-E-12-01.”Id.CAPAI asserted that Avista’s low-income weatherization
assistance program is cost-effective and consistent with the metrics,and thus recommended that
the “moratorium”on additional funding for the program be lifted.Id.CAPAI did not propose a
funding increase in this case but submitted that a fiat moratorium on all three utilities is no
longer justified.Id.
C.Company Reply
In its reply comments,the Company stated that it takes no issue with Staff’s
recommendation or the supportive comments of CAPAI.Id.The Company appreciates the
“long-standing collaborative working relationship”with the Commission,Staff,CAPAT,and
ORDER NO.33769 8
other stakeholders,and that it believes the relationships have benefited customers and
stakeholders and been constructive in refining its DSM programs.Id.at 1-2.
D.Public C’oninieiits
The Commission received one public comment on the Application,which expressed
that customers rarely have the opportunity to favorably comment on the activities of the utility
that provides essential services.The commenter indicated that the Company “offers excellent
service to its many clients”and “appears to be a leader in the field of planning and providing
service to present and future clients.”
COMMISSION FINDINGS
The Company is an electrical and gas corporation,and the Commission has
jurisdiction over it and the issues in this case under Title 61 of the Idaho Code and the
Commissions Rules of Procedure,IDAPA 31.01.01 .000,et seq.
Based on our review of the record we find that the Company prudently incurred
$9,721.985 in 2014-2015 DSM expenses,and maintains a tariff rider balance of ($153,986)
(underfunded).Our approval of DSM expenditures is $277,798 less than what the Company
requested.Our adjustment is based on a more precise jurisdictional allocation and removal of
claimed expenses that lack documentation.
The Company’s energy efficiency programs were cost-effective in 2014 and 2015,
but energy savings decreased in 2015,and missed the target the Company had set in its
Integrated Resource Plan (IRP).We note Staff’s concerns regarding missing this target,and
encourage the Company to work collaboratively with Staff in addressing future concerns.
As discussed,the Company provided a number of tools for scoring the cost-
effectiveness of a given program,focusing on the UCT and TRC.We find that the UCT more
accurately assesses the value of energy efficiency as a resource,but also note the value in the use
of a full suite of cost-effectiveness evaluations.
We encourage the Company to refine its DSM reports.Specifically with regard to the
LIWA section of the 2014 DSM report,which appears to not use Idaho-specific data.Generally,
the reports should include descriptions of how programs are operated,delivery strategies,and
explain any changes made to the program over time.
The Company should continue to work with the relevant CAP agencies to develop
and implement additional program changes to benefit the LIWA program customers.Despite
ORDER NO.33769 9
CAPAI’s assertions to the contrary,this Commission has not established a moratorium”on
funding increases for low-income weatherization assistance programs.Order No,32788,to
which CAPA1 refers,was the conclusion of a generic case in which parties and the Commission
considered “issues related to the funding.implementation,and evaluation of utility low-income
weatherization and energy conservation education programs.”Id.at 1.Therein,the Commission
advised Avista to defer considering funding increases for Avista’s program until at least spring
2014 due to the cost-ineffectiveness of the program at the time the Order was issued (April
2014).Id.at 13.The Commission advised Idaho Power Company and Rocky Mountain Power
to defer considering funding increases for their low-income weatherization programs until those
utilities had published their annual DSM reports.Id.The Commission also identified five
factors that it would consider when evaluating a future request for a funding increase.Id.at 12.
Those dates or milestones have now passed,and a utility or stakeholder could request a funding
increase at any time.The Commission has not had occasion to consider a request for a funding
increase for a utility’s low-income weatherization assistance or conservation education programs
since Order No.32788.
INTERVENOR FUNDING
The final issue of intervenor funding falls under Idaho Code §61-6l7A,which states
that it is the “policy of [Idahol to encourage participation at all stages of all proceedings before
this Commission so that all affected customers receive full and fair representation in those
proceedings.”The statute empowers the Commission to order any regulated utility with
intrastate annual revenues exceeding $3.5 million to pay all or a portion of the costs of one or
more parties for legal fees,witness fees and reproduction costs not to exceed a total for all
intervening parties combined of $40,000.Id.The Commission must consider the following
factors when deciding whether to award intervenor funding:
(a)A finding that the participation of the intervenor has materially contributed
to the decision rendered by the Commission;
(b)A finding that the costs of intervention are reasonable in amount and
would be a significant financial hardship for the intervenor;
(c)The recommendation made by the intervenor differed materially from the
testimony and exhibits of the Commission Staff;and
ORDER NO,33769 10
(d)The testimony and participation of the intervenor addressed issues of
concern to the general body of users or consumers.
Idaho Code §61 -61 7A(2).To obtain an intervenor funding award,an intervenor must comply
with Commission Rules of Procedure 161 through 165.Rule 162 provides the form and content
for the petition.IDAPA 31.01.01.162.
CAPAI timely petitioned for intervenor funding,seeking an award of $5,928.See
CAPAI’s Petition for Intervenor Funding (CAPAI Petition).The Petition includes an itemized
list of expenses incurred.CAPAI stated that it is a non-profit corporation overseeing a number
of agencies who light the causes and conditions of poverty through Idaho.Id.at 6.CAPAI
asserted that its sole source of funding to cover the up-front costs of intervention is federal
LIHEAP grant monies.Id.at 7.
CAPAI stated that it has fully participated in every aspect of this proceeding,
materially contributed to the Commission’s decision in this matter and was the only party to
propose rate increases and rate design issues affecting the Company’s low-income customers.
Id.at 4.CAPAI maintained that its recommendations differed materially from those of
Commission Staff because it was the “only party to address the Company’s low income
programs in significant detail and to propose a finding by the Commission that there no longer is
a moratorium on future increases in Avista’s low income programs depending upon
circumstances at the time.”Id.at 7.
We find that the request for intervenor funding satisfies the intervenor funding
requirements.CAPAT participated in the case and materially contributed to the examination of
the issues and the Commission’s decision.Indeed,CAPAI’s arguments regarding a perceived
moratorium differed materially from the issues addressed by Staff We further find that
CAPAI’s requested costs of its intervention are reasonable and preventing recovery of such costs
would cause a significant financial hardship for CAPAI.Therefore,we find it fair,just and
reasonable to award the funding request of $5,928 chargeable to the electric residential customer
class.
ORDER
IT IS HEREBY ORDERED that Avista’s Application for a determination of
prudency of its demand-side management expenditures from January 1,2014 through December
C)RDERNO.33769 11
31,2015.is approved.The Commission finds the Company prudently incurred $9,721,985 in
electric energy efficiency expenses.
IT IS FURTHER ORDERED that the Company take such actions as directed in the
body of this Order,including the intervenor funding award to CAPAI in the amount of $5,928
chargeable to the electric residential customer class.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order with regard to any
matter decided in 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 Zc1
day of June 2017.
PAUL KJELLANDER,PRESIDENT
ATTEST:
4
/i 7t/
Diane M.Hanian
Commission Secretary
O:AVU-E-1 6-06cc5
ERIC ANDERSON,COMMISSIONER
ORDER NO.33769 12