20210505Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9917
Street Address for Express Mail:
1 I33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA'S
APPLICATION FOR A PRUDENCY
DETERMINATION FOR 2018.2019
ELECTRIC AND GAS ENERGY
EFF'ICIENCY EXPENDITURES
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission ("Staff'), by and through its Attorney
of record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On November 25,2020, Avista Corporation dba Avista Utilities ("Company") filed two
Applications, each requesting the Commission issue an order finding that the Company's electric
or gas energy efficiency expenditures from January I , 2018 through December 3 I , 201 9 were
prudently incurred (referred to collectively as the "Applications"). The Applications summarize
the Company's energy efficiency activities and their cost-effectiveness. The Applications
include the Company's 2018 and 2019 Annual Conservation Reports and the 2019Idaho
Research and Development Report. The Applications also include the 201812019 impact
evaluation reports for the Company's electric and gas energy efficiency programs. The
Company requests that the Applications be processed by Modified Procedure.
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CASE NO. AVU.E.2O-13
AVU-G-20-08
STAFF COMMENTS MAY 5,2021
STAFF ANALYSIS
Staff reviewed the Company's Applications; Annual Conservation Reports; Evaluation,
Measurement, and Verification Reports ("EM&V"); and additional information received during
its review of the Company's program offerings. Based on its review, Staff recommends the
Commission approve $15,220,138 in electric and $2,828,124 in natural gas expenditures as
prudently incurred from January 1,2078 through December 31,2019.
Financial Review
Staff audited the Company's Demand Side Management ("DSM") expenses and
determined that the Company documented expenses correctly and that most of the Company's
DSM rider expenses appear to be prudent. Table No. I below provides a summary of the
Company's Idaho Electric rider revenues and expenses and Table No. 2 below provides a
summary of the Company's Idaho Natural Gas rider revenues and expenses.
Table No. L: Idaho Electric Rider Revenues and Expenses
201 8
Beginning balance - underfunded $ (9,574,630) $
Tariff revenues $ 10,177,172 $
Funds available
DSM expenses
Nexant removal
Audit adjustments
2019
(7,045,723)
r0,332,033
$ 602,542 s
$ (7,736,789) $
$ 94,489
$ (5,965) $
3,286,311
(7,573,073)
1,200
Ending balance - underfunded $ (7,045,723) $ (4,285,563)
Table No. 2: Idaho Natural Gas Rider Revenues and Expenses
2018 2019
$ 180,889 $ 303,048Beginning balance - overfunded
Tariff revenues
Funds available
DSM expenses
Nexant removal
Audit adjustments
Ending balance - overfunded
s 1,332,963 $ 1.461.206
$ 1,513,852
s (1,219,664)
$ 60,634
$ 8,226
$ 303,048 $ 146,933
g 1,764,254
$(1,617,320)
2STAFF COMMENTS MAY 5,2021
Staff recommends removing all expenses paid to Nexant, Inc. ("Nexant") for the
Company's third-party evaluations in 2018 related to its 2016-2017 biennial EM&V reports.
This is consistent with the Stipulation and Settlement ("Stipulation") entered by Staff and the
Company and later approved in the Company's last DSM prudency case, Case Nos.
AVU-E- 18 -72 and AVU-G- I 8-08. In that case, Staff and the Company agreed that "the Nexant
reports contained a number of significant errors-including but not limited to incorrect tables,
typographical errors, and other deficiencies-and therefore were not used and useful."l The
Stipulation removed all expenses paid to Nexant during the2016-2017 evaluation period. In
2018, the Company incurred additional expenses related to the 2016-2017 Nexant evaluation.
Because the scope of the previous case was the determination of prudent expenses charged to the
Company's energy efficiency tariff rider during 2016 and2017, the Stipulation did not address
expenses incurred in2018 for items related to the previous evaluation period. Consistent with
the position of the parties in that case, the Nexant expenses incurred in2018 have been removed
because Nexant failed to produce accurate reports containing reliable information from which
Staffcould establish a position on the cost effectiveness of the Company's programs.
For the 2018-2019 evaluation period, the Company used the Cadmus Group ("Cadmus")
to perform and prepare the EM&V reports. Staff does not recommend any adjustments related to
the Company's EM&V reports for the 2018-2019 evaluation period, though concerns with the
Cadmus EM&V reports will be discussed below.
Staff recommends several other adjustments based on its audit of DSM expenses shown
in the "Audit adjustment" rows in Table Nos. I and2. A $6,650 Idaho electric incentive
payment was incorrectly assigned to the Idaho natural gas tariff, which Staff has re-assigned to
the electric tariff. Additionally, $1,885 of electric expenses and $1,576 of natural gas expenses
that should have been assigned to the Company's Washington customers were incorrectly
charged to Idaho. The Company stated that it has created new controls to limit Washington
expenses assigned to Idaho, and Staff found fewer of these effors than in the Company's past
prudency cases. Stafffound four such errors in this case: two were incentive payments for
Washington addresses and two were for postage to customers that were not accurately assigned
to Washington and Idaho jurisdictions. The Company acknowledged all these errors during
I Stipulation and Settlement-Avu-E- I 8- l2 and AVU-G- I 8-08, at 7
aJSTAFF COMMENTS MAY 5,2021
Staff s audit. Combined, the Nexant and audit adjustments would decrease the Company's
prudency request by $89,725 for the electric rider and $68,860 for the natural gas rider.
Energy Efficiency Portfolio Overview
In the 2018 Annual Conservation Report, the Company reported its Idaho electric
portfolio achieved 160% of its Integrated Resource Plan ("lRP"; goals, acquiring 29,805 MWh
of savings despite a decrease of 18,843 MWh in savings from 2017. Much of the reduced
savings can be associated with the interior prescriptive lighting in the commercial/industrial
("non-residential") sector. In 201 8, non-residential programs experience d a 47o/o decrease in
savings from 201 7. Exhibit No. 2 at 4-7 . In the 2019 Annual Conservation Report, the trend
continued for the electric portfolio. The Company achieved 144% of its IRP target while
experiencin g a 4,57 4 MWh decrease in savings from the prior year. The Company experienced a
27oh drop in acquired savings through its non-residential programs, mostly associated with the
Company's non-residential prescriptive lighting programs. Despite the drop in the Company's
electric portfolio savings, the Company reported a23oh increase in savings for the residential
program from 2018. Exhibit No. 3 at 4-6.
In 2018 and 2019, the Company's Idaho natural gas portfolio achieved 82o/o of its IRP
target. In the 2018 Annual Conservation Report, the Company reported 247,756 therm savings,
a decrease of 57,752 therms from2017. In2018, residential and non-residential programs
experienced9oh and 51olo respective decreases from savings acquired in2017. Exhibit No. 2 at
4. The Company stated that "much of the change is attributed to commercial/industrial
prescriptive programs and to residential HVAC and water heater programs." 1d. The trend
continued into 2019, with both programs experiencing a decrease in therm savings to a total of
212,764 therms - 68% of the Company's IRP target. Application at 6. The decrease is mainly
attributed to a l2Yo decline in savings for residential programs. The Company states this is due
to "fewer customers converting to natural gas due to the lower conversion incentive level."
Exhibit No. 3 at 4.
Residential Programs
The Company's Idaho residential electric program reported a25Yo increase in savings
from 2018 to 2019. Notably, the Company reported significant improvements to its Multifamily
4STAFF COMMENTS MAY 5,2021
Direct Install and the HVAC measures. These two programs accounted for 35oh of the reported
residential savings in2019 compared to23oh of the reported savings for the residential program
in 2018. Multifamily Direct Install savings increased because of higher customer participation
while the HVAC program had verified savings that were greater than originally reported. The
large increase in HVAC savings is attributed to Electric Variable Speed Motors ("VSM")
outlined below.
In a billing analysis in its 20l9ldaho Electric Impact Evaluation, Cadmus concluded that
the VSM measures' annual Unit Energy Savings ("UES") is 1,528 kWh per unit, a significant
increase from the Company's assumed 414 kwh per unit, resulting rna369Yo realization rate.
Cadmus stated that most participants installed the 90o/o AFUE Natural Gas measure with the
VSM measure. 2019 Electric Impact Evaluation at22-23. As a result, Cadmus explains that
"the high electric energy savings appears to have resulted at least partly from a shift in some
homes away from secondary electric heating, such as portable electric heaters or electric wall
heaters, after installing the new gas furnace." 20l9ldaho Electric Impact Evaluation at22-23.
In concurrence with these findings, Cadmus recommended the Natural Gas Furnace measure
UES values be decreased to 7l therms from 102 therms. 2019 Natural Gas Impact Evaluation at
16. In 2018 and 2019, both the VSM measures and Natural Gas measures reported cost
effectiveness ratios above 2.0 from the Utility Cost Test ("UCT") perspective.
Despite the VSM measure being cost effective, the Company specifies that "VSM
incentives will no longer be offered in2020, due to VSMs becoming standard equipment on
natural gas forced air furnaces." Exhibit 3 at 64. Staff applauds the Company for adjusting its
programs and measures as technological advances become standardized in new equipment.
Because the Company is a dual fuel source utility, it can claim energy savings by reducing both
electricity and natural gas energy usage with its programs and measures. Since VSMs are now
standard equipment in natural gas forced-air furnaces, Staff encourages the Company to explore
the potential electric savings in Natural Gas Furnace measures that were previously captured by
VSM measures in the Company's next EM&V process for the program. If electric savings are
available, Staff recommends the Company adjust its incentives accordingly to encourage more
customers to switch to high-efficiency natural gas furnaces.
Throughout the Pacific Northwest, electric utilities have reported a significant amount of
residential electric savings from the Simple Steps, Smart Savings program, administered by the
Bonneville Power Administration ("BPA"). The regional program focused on a buy-down
5STAFF COMMENTS MAY 5,2021
model that provides incentives directly to manufacturers or retailers for energy-efficient
products. Most of the savings from the program can be attributed to energy-efficient lighting,
specifically transitioning the residential sector from incandescent lightbulbs to LED lightbulbs.
In 2018 and 2019, the Company saved 7,333,489 kWh from the Simple Steps, Smart Savings
program. This accounted for 50% of the Residential portfolio savings for both years. Due to the
Energy Independence and Security Act and market saturation of residential LED lighting, the
BPA ended the Simple Steps, Smart Savings program on September 30, 2020. Staff is concemed
that in its next DSM prudency filing in 2022, the Company's residential portfolio will have a
significant decrease in savings following the sunset of the Simple Steps, Smart Savings program.
Staff encourages the Company to work with its Energy Efficiency stakeholders to develop a plan
to replace energy savings no longer claimed due to the elimination of the Simple Steps, Smart
Savings program.
Rebates and Incentives
Staff is concerned with the fluctuation of the rebates and incentives offered by the
Company. Table No. 3 shows the Company's rebate amounts for smart thermostats, which has
changed four times in the last six years.
Table No. 3: Smart Thermostat Rebate
2016 2017 2018-2019 202t
Self-Installed (DIY)$3s $7s $60 $ l2s
Contractor Installed $70 $ 100 $7s $ls0
It is not uncommon for the Company to change rebate amounts every year, and in some
cases, multiple times in a year. In 2019 the Company changed its incentive for ENERGY STAR
Manufactured Homes natural gas customers from $600 to $200. The incentive then increased to
$400 midway through the year. Exhibit 3 at70. The Company stated in its response to
Production Request No. 36. that for 2019, the ENERGY STAR Manufactured Homes natural gas
program had estimated first-year savings lower than the prior year, and the program's incentive
was adjusted to maintain cost effectiveness from the Total Resource Cost ("TRC") test
perspective. The incentive was then adjusted to $400 to maximize throughput since the measure
was cost effective under UCT. Response to Production Request No. 36.
6STAFF COMMENTS MAY 5,2021
After further discussion with the Company, Staff learned that the Company tries to offer
consistent rebates and incentives for all its programs in Idaho and Washington. With
Washington being evaluated from the TRC perspective and Idaho by the UCT perspective, this
can be difficult and causes varying rebate amounts. Given the frequent cross-state travel in much
of the Company's service area, Staff understands the Company's desire to match incentives and
rebates between jurisdictions, but notes this will not always be possible with the fundamental
differences between the UCT and TRC. Staff believes the Company should evaluate rebates and
incentives from the UCT perspective for its Idaho customers before making changes to the rebate
and incentive values.
In addition to the above, Staff believes the Company should consult with its Energy
Efficiency stakeholders to formalize a process for evaluating and changing rebates and
incentives. The Company often changes rebate and incentive levels year-over-year, with the
previous cited smart thermostats and ENERGY STAR Manufactured Homes being just a few
examples of these reoccurring changes. In response to Production Request No. 36, the Company
indicated for its programs and measures that a process exists for setting and adjusting rebate and
incentive levels, but the Company has no documented formal process for making these changes.
When making changes to programs and measures, the Company should have sufficient
sample sizes to pull from for evaluating potential changes. In the case of the ENERGY STAR
Manufactured Homes natural gas measure, Staff discovered that the "ENERGY STAR Homes
program had too few participants to produce meaningful billing analysis results." Exhibit No. 3
at 57. In 2018 and 2019, the Company had only 6 projects completed in two years for the
program. Exhibit No. 3, Table No. 44 at 69. While the results show a year-over-year change in
the therm savings, Staff believes that a substantial sample population size and a proper
evaluation for programs and measures is necessary to determine changes to rebates and
incentives.
As of May 4,2021the Company's website2 indicates the ENERGY STAR Manufactured
Homes incentive for natural gas customers is currently back to the original $600 prior to multiple
changes in2019. Year-over-year changes to savings achieved is common and can be influenced
by a multitude of factors. However, constant fluctuation of rebates may frustrate and
2 Energy Star Manufactured Home lncentive available a/ https:l/nrvavista.conr'energ)-savings,'r'ebates-idalto (last
visited April 15, 2021).
7STAFF COMMENTS MAY 5,2021
disincentivize customers to not spend the extra money for a more energy efficient product that is
offered to customers through the Company's EE programs. Staff believes the Company should
consult with its Energy Efficiency stakeholders to document and formalize a process for setting
and adjusting rebates and incentives. The Company should discuss - but should not limit -
items such as EM&V studies, sufficient size of data or population for altering programs, program
cost-effectiveness, customer participation, and adequate customer notice of program changes. A
documented process will provide the Company with the necessary framework for providing its
Idaho customers with the best EE offerings while maintaining a cost-effective program or
measure
Non-residential
In 2018 and 2019, the Company's non-residential electric portfolio displayed diminishing
returns on savings from previous years. In 2018, the non-residential electric portfolio reported a
47Yo decrease in total savings, and in20l9, the Company reported an additional2T%o decrease in
savings from 2018. The Company claims the oodecrease can be attributed to a significant amount
of interior lighting savings that was already captured over the 2016-2017 biennium." Exhibit
No. 2 at 35. Table No. 4 illustrates the components of the decreased savings in the Commercial
and Industrial program from2017 through 2019. The savings reduction in the Interior Lighting
program accounts for most of the 26,218,598 kWh savings that decreased from 2017 through
2019. For Exterior Lighting, the program showed an increase in throughput and reported an
increase in savings.
Despite reductions in year-over-year savings, the Company's non-residential electric
portfolio remained cost effective in 2018 and 2019, reporting cost effectiveness ratios above 2.0
from the UCT perspective. Other than fuel efficiency measures, all measures for the portfolio
are reported to be cost effective by the Company.
8STAFF COMMENTS MAY 5,2021
Table No. 4: Commercial/lndustrial Electric Savings
*2017 Interior and Exterior Lighting Savings are sourced from AVU-E-18-12, Application: ldaho 2017 DSM
Annual Report & Cost-Effectiveness Analysis at 42. All other savings data are sourced from Exhibits 2 and 3.
Low-Income Weatherization
The Company partners with the Lewiston Community Action Partnership ("CAP") to
administer its energy efficiency programs to its low-income customers. The Company provides
CAP with a qualified list of measures that the Company fully funds based on the measures that
are deemed cost effective from the TRC perspective during the development of the Annual
Conservation Plan. Exhibit No. 2 at78. For measures that are not cost effective, the Company
provides CAP with a list of measures that receive partial reimbursement equal to the avoided
cost energy value for each measure. Exhibit No. 2 at78. In2018, the Company fully
reimbursed CAP for 13 natural gas, electric, and fuel conversion measures, and this number
climbed to 20 measures in 2019 for the Company's low-income customers. See Exhibit No. 2 at
78 and Exhibit No. 3 at 86-87.
Following adjustments to the Company's tariffs and an increase in funding, the
Company's Low-Income program remains cost ineffective from the UCT perspective in 2018
and 2019. In 2018, the Company reported the Low-lncome Electric portfolio as cost effective
with a TRC ratio of I .04, which was later adjusted to I . 17. After Staff identified errors in the
Company's cost effectiveness results, the Company filed revisions which are shown on Table
No. 5. The errors are highlighted in the Compliance with Order No. 34647 section on page 12 of
Staff Comments.
9
20r7 201 8 2019
Total Electric Savinss &Wh)42.962,098 22.897.942 16,743,500
Prescriptive Liehtine: Interior & Exterior (kwh)23,1r9,693 t2.256.065 7,822,478
Interior Liehtine ftWh)20,666,146 8.012.238 4,518,758
Exterior Liehtine &Wh)2.4s3.547 4.243.826 3,303,660
Site-Specific (kWh)10.705.817 t0.205.592 8.425.874
STAFF COMMENTS MAY 5,2021
Table No. 5: Low-Income Portfolio Performance
2018 Electric 2019 Electric 2018 Gas 2019 Gas
Verified savings 355,753 kwh 269,934kwh 4,772 therms 3,932 therms
Filed UCT B/C Ratio 0.s9 0.48 0.15 0 11
Revised UCT B/C Ratio 0.59*0.57 0.15 0.15
Filed TRC B/C Ratio t.04 0.71 0.17 0.17
Revised TRC B/C Ratio t.t7 0.9s 0.31 0.63
*No revisions occurred.
In2019, the Company's Low-lncome Electric portfolio was cost ineffective with a 0.95
TRC and 0.57 UCT. The overall drop in cost effectiveness and overall savings from 2018 is
mostly due to the Company's Fuel Conversion program. The 2019 Fuel Conversion Program
reported a65,246 kWh decrease in savings from 2018, achieving3T% of the Company's
101,640 kWh energy savings goal. Exhibit 3 at 86. In Response to Production Request No. 32,
the Company indicated for the Fuel Efficiency program that much of the decrease in savings is
associated with a lower throughput per measure and a result of Unit Energy Savings ("UES")
values being reduced because of a 2016-2017 Impact Analysis for the Furnace and Water Heater
combo measure. Staff notes that after an increase in funding and revisions, the 2019 low-income
electric portfolio was almost cost effective with 0.95 TRC. Staff will continue to monitor the
low-income electric portfolios for future cost effectiveness.
In 2018 and 2019,the low-income natural gas programs were cost ineffective from both
the TRC and UCT perspective, as depicted in Table No. 5. In 2018, the Company achieved 660/o
of its savings goal and22Yo of its participation goal for the low-income natural gas programs.
2018 Natural Gas Impact Evaluation at 15. In 2019, the trend continued with the Company
achieving 15% of its therm savings goals. 2019 Natural Gas Impact Evaluation at 19. The
Company states that l5oh participation achievement is due to a "blatant lack of participation in
insulation measures...The Company had planned for approximately 17,500 therms from
insulations alone but found virtually no throughput." Response to Production Request No. 33.
Staff notes for the low-income natural gas programs that the Company did not address the failing
participation and failing cost effectiveness in its Annual Conservation Reports. In the next DSM
prudency filing, Staff encourages the Company to work with CAP to address decreased
participation and increased throughput, while working to increase the cost effectiveness of low-
income natural gas programs.
STAFF COMMENTS 10 MAY 5,2021
Northwest Energy Efficiency Alliance ("NEEA")
In 2018 and 2019, the Company spent a combined $1,296,544,7o/o of ldaho rider funds,
on regional market transformation through NEEA, Through market transformation in the Pacific
Northwest, NEEA's purpose is to improve gas and electricity efficiency usage by endorsing and
advancing energy-efficient practices, services, and products. NEEA claims savings in two areas:
l) efficiency measures; and2) codes and standards. NEEA then reports savings to the Company
in an annual report3 using two different allocation methods the Company can choose: l) "service
territory"a allocation; and2) "funder share"5 allocation. In2Olg,the Company switched
allocation methods from o'service territory" to funder share allocation. For natural gas, NEEA
currently does not forecast energy savings for the 2015-2019 business plan, and it anticipates
work in the area will deliver savings in2019 or later. Exhibit No. 3 at l0l.
NEEA reported a combined savings of 8,819 MWh savings in 2018 and 2019, with 5,030
MWh of those savings being captured in 2018 for the Company's Idaho service territory.
Eighty-five percent of the NEEA reported savings (7,480 MWh or 0.85 aMW) originated from
codes and standards and the remaining originated from efficiency measures. See Response to
Production Request No. 12. Notably, in its 2018 Annual Savings Report, NEEA reports 0.18
aMW of electric savings in codes and standards from "Residential/Commercial Battery
Chargers" in Oregon for the Company's Idaho service territory. In an evaluation report prepared
for NEEA, D&R International states that the "Oregon energy efficiency standard for battery
chargers duplicated the California standard, which went into effect 1 I months earlier... [and that]
NEEA provided technical expertise and served as an important resource to the Oregon legislature
throughout the legislative process for Senate B.iLl692."6 Given that NEEA does not claim any
natural gas savings in the 2015-2019 business plan and the Company only provides natural gas
3 The Company provided Staff the annual reports. The reports are referred to as the NEEA 2018 Annual Swings
Report and NEEA 201 9 Annual Savings Report.
a Service Territory Allocation: "NEEA allocates the savings using the most disaggregated data available. The data
sources can range from service-territory level to regional. The Program worksheets note the data source. When
NEEA has only regional level data, NEEA allocates the savings using funding shares. NEEA applies the funder
shares to savings by initiative based on the initiative start." NEEA 2019 Annual Savings Report Avista
Idaho 20200319.x1sx.
5 Fundir Share Allocation: "NEEA allocates the regional savings (Idaho, Montana, Oregon, and Washington) using
funder shares. The shares vary based on the funding cycle. Savings from previous investments receive the previous
funder share. Savings from current investments receive the current funder share." NEEA 20 l9 Annual Savings
Report Avista Idaho_202003 I 9.xlsx.
6 Logic Model Review and Savings Estimates of Battery Charger Standards in Oregon at I available at
!11lpUltrregA.glgfugXlplooclsr'logic-nrode l-re vicrv-and-sav ings-estirnates-of-ba[9ly:!IQggi:$andards-in-orcgon.pdt'
(last visited February 22,2021).
STAFF COMMENTS 1l MAY 5,2021
services to its customers in Oregon, Staff is unclear how an electrical standards change in
Oregon provides any benefits to the Company's Idaho customers. Staff believes it is
inappropriate for NEEA to claim electric savings from Oregon electrical codes and standards that
simply duplicated California's codes and standards.
Additionally, in the NEEA 2019 Annual Savings Report, some of the savings reported for
the Company's Idaho service territory are from Washington and Oregon codes. For example, an
initiative called "Next Step Homes" was part of a Washington State Energy Code in 2015 for
residential and single-family homes and NEEA claimed it saved 0.01 aMW for Idaho customers.
Staff is uncertain how a Washington code provides benefits to Idaho customers. If such savings
are to be claimed for out-of-state codes and standards, a transparent evaluation should be
provided to Staff and outlined in the Company's Annual Conservation Reports describing how
such programs benefit Idaho customers. NEEA currently claims 100 percent of savings for
code-to-code changes. Staff is concerned that NEEA may claim savings that it is not directly
responsible for. If savings from codes and standards are removed, NEEA would not be cost
effective. Staff believes that to support the continued funding of NEEA, an independent EM&V
must be conducted to clari$ the savings NEEA claims plus the allocation and cost effectiveness
of those savings to its member utilities based on the utilities' DSM avoided cost.
Compliance with Order No.34647
In Case Nos. AVU-E-18-12 and AVU-G-18-08, the Commission approved the
Stipulation that required the Company to take additional steps to improve its Energy Efficiency
Program. Since that Commission order, the Company has complied with the terms of the
Stipulation, which included re-submitting its 2018 Annual Conservation Report, holding a
Business Process Improvement workshop focusing on its annual reports and EM&V, and
performing an intemal audit of its energy efficiency processes.
The Company submitted a compliance report on July 31,2020. Staff has reviewed the
report and found that it complies with the Settlement approved in Order No. 34647.
Additionally, Staff found that the Company's 2018 and 2019 Annual Reports appear to be more
accurate and useful than its Annual Reports filed with its previous DSM prudency case. The
Company clearly identified the sources of savings, costs, and evaluations for each program and
fuel source. The Company highlights changes that occurred to programs from previous years
STAFF COMMENTS t2 MAY 5,2021
and changes that will occur based on EM&V studies. Overall, the Company's technical product
in the Annual Conservation Reports has improved.
However, the data that supports the Company's Annual Conservation Reports is still
lacking in several areas. Many of the issues appear to be directly related to Company's reliance
on a third-party contractor to conduct its cost-effectiveness results for the Company's programs.
During its review of the Company's low-income portfolio, Staff discovered significant
issues and errors with its reporting and calculations. Significant issues arose with misreporting
the Company's 2019 Health and Safety ("H&S") costs. ln20l9, the Company's Low-Income
Natural Gas cost effectiveness test had $145,985 in H&S costs, which would be approximately
460/o of the Company's $318,1017 in expenditures in 2019. In working with Staff, the Company
discovered that they had included all H&S costs from 2017 to 2019, rather than just 2019 costs.
Response to Production Request No. 34. The actual low-income natural gas portfolio only spent
$48,481 on H&S upgrades in2019,15% of the Company's total $318,101 expenditures. After
the error was discovered, the Company provided Staff with updated cost effectiveness results for
2019, removing the 2017-2018 H&S cost. See Table No. 6. Overall, these errors lowered the
cost effectiveness of the Company's low-income program, as shown in the "Revised" values in
Table No. 6.
Additionally, the Company was not capturing the dollar of non-energy benefit for each
dollar of cost associated with the H&S expenditures in the Company's TRC test8 in 2018 and
2019. This step is critical as it provides the best possible outcome for low-income programs that
are struggling to become cost effective and provides measurable benefits to H&S home
improvements that would not normally be quantified. The Company provided updated cost-
effectiveness results for the low-income programs and the added H&S benefits, which can be
seen in Table No. 6.
Staff also found errors in Cadmus' output files that were provided through discovery.
The output files detail the Company's savings, administration cost, incentive cost, benefits, and
total costs for the UCT, TRC, and Participant Cost Test ("PCT"). The Company uses these
results to evaluate its portfolio and individual measure performance. The results from these files
7 Exhibit 3 at Appendix E - 2019 Expenditures By Program. Low Income Natural Gas Expenditures totals
$318,101.
8 "Staff Recommendation No. 8 proposes that Avista continue quantiffing utility-funded health, safety, and repair
measure as a dollar ofnon-energy benefits for each dollar ofcost...the non-energy benefits should be included in the
TRC." Final Order No. 32788 at 6-7.
STAFF COMMENTS l3 MAY 5,2021
are in the Company's Annual Conservation Reports. In the output files for the 2018 low-income
natural gas portfolio and the2019 non-residential electric portfolio, Staff discovered a
discrepancy between the "total cost" and the cost reported for the UCT test. In most situations,
these costs are equal. The "total cost" category is the incentive payments plus the administration
cost, which are all costs that would be included in the cost for the UCT. However, in both files,
Staff discovered the cost for the UCT was reported to be lower than the overall "total cost" for
all measures in the portfolio. After further discussion with the Company, Staff and the Company
discovered the error had originated from Cadmus' modeling, which incorrectly applied a
discount rate from the o'total cost" to the UCT cost for all measures. This error made the UCT
cost lower than the total cost reported, a difference of $3,300 for the 2018 low-income gas and
$159,789 for the 2019 non-residential electric portfolios. Thus, the UCT reported in the Annual
Conservation Report was higher than it should have been. The Company's revisions for these
errors can be seen below with the updated cost effectiveness results in Table No. 6 for the low-
income portfolio and Table No. 7 for the 2019 non-residential electric portfolio.
Table No. 6. Revised Low-Income Portfolio Performance
*No revisions occurred.
**Company's workbook indicates TRC cost for H&S is $67,885
Table No. 7. Revised 2018 Non-Residential Electric Portfolio
2018 Electric 2019 Electric 2018 Gas 2019 Gas
Filed UCT Cost $622,702 $8 1 3,1 32 $334,060 $344,431
Revised UCT Cost $622,702*$681,684 $337,360 $246,927
Filed H&S Cost $75,790 $170,162 $46,764 $ 145,985
Revised H&S Cost $75,790*$42,919 $47,255 $52,248
Added TRC H&S Benefits $47,255**$38,023 $42,605 $49,502
Filed UCT B/C Ratio 0.s9 0.48 0.l s 0.1 I
Revised UCT B/C Ratio 0.59*0.57 0.15 0.15
Filed TRC BiC Ratio l.04 0.7r 0.r7 0.17
Revised TRC B/C Ratio t.t7 0.9s 0.31 0.63
Filed UCT Revised UCT Filed TRC Revised TRC
Portfolio Cost s3,754,425 $3,914,214 $5,602,120 $5,840,805
B/C Ratio 2.96 2.84 2.19 2.10
STAFF COMMENTS 14 MAY 5,2021
In the Stipulation in the Company's previous DSM prudency cases, AVU-E-I8-12 and
AVU-G-I8-08, Attachment A: Staff Issues and Recommendations Item No. 8 states "workpapers
provided to Staff by the Company were incomplete, and often consisted of hard-coded numbers
with no supporting calculations or data." In this case, Staff discovered similar issues. In the
output files provided to Staff for the Company's cost effectiveness calculations, the files all
contained all hard-coded numbers with the source of the avoided-cost calculations not present.
During discovery, the Company was responsive to Staff and able to provide an example with
formulas enabled of an individual measures avoided-cost calculation, along with other important
calculations such as UCT cost and benefit calculations. The example provided to Staff was
computed correctly. While one measure was able to be verified, Staff was unable to verifu the
remaining measures. In most situations, Staff was able to replicate the work that was produced
in the hard-coded workbooks to the example provided. However, in some situations, workbooks
will factor in increased energy usage or have added benefits that are not included in calculations
that were provided to Staff in the example, such as calculating the low-income cost-effectiveness
results. Having a cohesive workbook with formulas enable would potentially resolve some of
the Company's issues with the cost-effectiveness test.
The issues highlighted earlier with the third-party contractor applying a discount rate to
the total cost could have easily been avoided with a cohesive workbook with formulas enabled
linking to other benefits and costs for the program. Staff believes the Company has improved in
resolving Item No. 8 from the Stipulation and Settlement but is still lacking in adequately
resolving the issue.
While the cost-effectiveness calculations for the Company were conducted by Cadmus,
ultimately the Company bears the responsibility for ensuring the quality and accuracy of these
calculations. The issues highlighted earlier with Cadmus models applying a discount rate, not
including H&S benefits, and including three years of H&S costs shows the problems with the
Company's reliance on a third-party contractor to conduct its cost-effectiveness results. Similar
issues were documented in the Stipulation - AVU-E-I8-12 and AVU-G-I8-08, Attachment A:
Staff Issues and Recommendations Item No. 9 states "Staff is concemed that the Company has
been delegating fundamental tasks to its third-party contractor, while providing little or
insufficient oversight." The Company is making fundamental business decisions on its DSM
programs based on cost-effectiveness results provided by Cadmus. Ensuring that the cost-
effectiveness results are calculated correctly is of the utmost importance. Based on the errors
STAFF COMMENTS l5 MAY 5,2021
presented earlier with the cost-effectiveness results, Staff believes these errors should have been
caught during the quality control process and would have not occurred had the Company
conducted their cost effectiveness test internally. Staff believes the Company did an inadequate
job in resolving Item No. 9 from the Stipulation and Settlement. Staff recommends the
Company internally conduct and calculate their cost-effectiveness tests.
Nexant EM&V Expenses
Since the2016 prudency filing, Staff has raised concerns with the Company's lack of
quality control processes and management of third-party contractors. Below are comments from
Staff regarding outstanding issues that are present in this prudency filing and in support of the
removal of Nexant EM&V expenses. Nexant EM&V expenses were expensed in 2018 in this
filing, but the EM&V work was completed for the 2017 DSM filing that resulted in the
Stipulation and Settlement and therefore should be disallowed.
In Case No. AVU-E-16-06, Staff said that:
Staff believes thart it is the responsibility ol'the Company to understand the
content and ensure that its reports are erccurate, regardless of whether it is
pr:epared b,v the Cclmpany itself or a contractor. In this case, the Conrpany's
Annual Ileports w'ere unreliable fbr r.rse by Staff because there are questions as
to the validity of infbrmation contained within it...ln addition, Staff intends to
closely examine expenses associated with producing the annual reports included
in this filing when thc Company asks fbr reoovery of those expenses in its next
pnrdency detenni uati on.e
Subsequently, the Stipulation and Settlement in Case Nos. AVU-E-I8-12 and AVU-G-I8-08,
Attachment A states:
Item 9: Stal'{'is concerned that the Company has been delegating flu.ndanterttal
tasks to its third-party contractor. w'hile providing little or insr,rfficient oversight.
Item 9a: Statf believes that the Cornpany ultimately bears responsibility
Ibr the quality, accuracy, and uselulness o{' both reports: fimpact
Evaluation and Annual Conservation Reporl]
Item 9b: Delegating responsibility tbr both its Annual Conservation
Reporl and its Impact Evaluation to tlie sarne contractor creates a
situation in which the contractor is evaluating its own lvork.
e Staff Comments at l0
STAFF COMMENTS t6 MAY 5,2021
item 10: Statf analysis of'Avista's DSM program revealecl a lack of internal
controls and insufJrcient use of quality assurance procedures not only in
reporting. but also in record keeping...[t).leliciencies were apparent during the
audit and through an exarnination of the repofi, rvhich should have been caught
if cluality assurance protocol were being irnplemented.
Staff recommends Nexant expenses of $155,122 for EM&V work related to 2017 DSM
programs that were included as expenses in this case should not be recoverable. Such expenses
were excluded in Case Nos. AVU-E-I8-12 and AVU-G-18-08 due to significant errors and
deficiencies in Nexant's work.
Additionally, many of Staff s concems with the Company's use ofNexant's work
continue to be present in this case even with a different contractor, Cadmus. Staff believes the
Company should have discovered and corrected errors by Cadmus. Additionally, Staff believes
the Company's is not adequately reviewing work from its third-party evaluators. Staff expects
these issues to be resolved in the Company's future DSM prudency filings. Staff intends to
closely examine the expenses associated with producing the Annual Conservation Reports and
the Company's cost-effectiveness results included in this filing when the Company asks for
recovery of those expenses in its next prudency determination.
Research and Development Projects
Staff recommends the Company be allowed to recover this year's expenses for the DSM
R&D program; however, Staff also recommends that future funding for this program either be
discontinued or suspended until the program can be redesigned to focus on R&D that provides
near-term, practical benefits for Idaho ratepayers. Staff found no evidence that any of the R&D
projects funded by the DSM rider have ever provided benefits to the Company's ratepayers.
Furthermore, Staff found no evidence that the Company has a process for implementing the
results of R&D funded by the DSM rider.
In Case No. IPC-E-I3-08, the Commission authorized the Company to use the DSM rider
to fund up to $300,000 annually in university R&D projects. Order No. 32918. Each year, the
Company selects projects to be funded from proposals submitted by researchers at Idaho's higher
education institutions.
STAFF COMMENTS t7 MAY 5,2021
In Order No. 32918, the Commission wrote, "We find it appropriate for Avista to fund
applied, energy efficiency R&D through the Rider because that R&D is intended to produce
near-term, practical benefits for Idaho ratepayers." Staffs review of all projects funded since the
program's 2013 inception found no instance in which the Company implemented the results of a
DSM-funded R&D project for the benefit of its ratepayers. In response to Staffs Production
Request No. 9, the Company provided a list of benefits that accrued to students and faculty of the
institutions conducting this research; however, the list did not include any tangible benefit that
could be realized by the Company's ratepayers.
Rather than providing near-term, practical benefits for ldaho's ratepayers, some R&D
projects funded by the DSM rider are unlikely to yield any tangible benefit for many years. For
example, the All Iron Battery project was intended to determine whether a particular graphene
material ("GUITAR") could be used to suppress Hz formation on battery electrodes. It is
unlikely that graphene will be produced economically in the foreseeable future, afact noted by
the researchers in their reports to Avista. Staff also notes that at the time this research was
funded, research at other institutions (e.g., The University of Southern California's Dornhaus
Center) had already determined that the Hz problem could be solved inexpensively, by reducing
the pH of the battery's electrolyte to 3.0 or less using ascorbic acid.
Staff also found several instances in which the Company and researchers missed
opportunities to modiff projects in ways that could have yielded practical benefit for the
Company's ratepayers. For example, the Aerogel project did not provide information not already
widely available from open sources. The panels used in the Aerogel project have been
commercially available for several years, and the k-values and other thermo-mechanical data
obtained by the researchers can be easily found in product data sheets. However, it would have
been a simple matter to modifu the researchers' apparatus and computer simulations to veriff and
adjust the thermal properties of materials and design features in the Company's Technical
Resource Manual.
In summary, Staff believes that program funding should be discontinued until such time
that it can be redesigned with the purpose of providing benefits to the ratepayers who fund it.
STAFF COMMENTS l8 MAY 5,2021
STAFF RECOMMENDATION
Staff recommends that the Commission approve $15,220,138 in electric and$2,828,124
in natural gas expenditures as prudently incurred from January 1,2018 through December 31,
2019. This amount reduces the Company's request by making adjustments to its Nexant EM&V
expenses and several misallocated expenses. Staff also recommends that the Company conduct
its cost-effectiveness tests internally and discontinue its Research and Development program.
sbRespectfully submiffed this day of May 2021.
Dayn
Deputy Attorney General
Technical Staff: Brad Iverson-Long
Taylor Thomas
Mike Morrison
Yao Yin
i : umisc/comments/avue20. I 3_arug20-Sdhblmmyytt comments
STAFF COMMENTS t9 MAY 5,2021
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 5TH DAY OF MAY 2021, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NOS.
AVU-E-20-I3/AVU-G.20.08, BY E.MAILING A COPY THEREOF, TO THE
FOLLOWING:
SHAWN J BONFIELD
AVISTA CORPORATION
POBOX3727
SPOKANE WA99220-3727
E-mail: [e-mail]
avi stadockets@ avi stacorp. com
DAVID J MEYER
VP & CHIEF COI'NSEL
AVISTA CORPORATION
PO BAX3727
SPOKANE WA99220-3727
E-mail: [e-mail]
Jntl"Ar*t
SECRET^o'Y--
CERTIFICATE OF SERVICE