28138.doc

before the IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF AVISTA CORPORATION DBA AVISTA UTILITIES—WASHINGTON WATER POWER DIVISION REQUESTING APPROVAL OF PROPOSED REVISIONS AND CHANGES TO ITS SCHEDULE 90 ELECTRIC ENERGY EFFICIENCY PROGRAMS—IDAHO TARIFF. )
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ORDER NO. 28138

On July 2, 1999, Avista Corporation dba Avista Utilities—Washington Water Power Division (Avista; Company) filed a complete revision of its Schedule 90 Electric Energy Efficiency Programs tariff with the Idaho Public Utilities Commission (Commission). The stated purposes of this tariff revision are: (1) to allow the Company to change its energy efficiency focus from specific technologies to various customer segments; (2) to modify and add to the list of available products and services; (3) to replace measure-specific customer incentives with a somewhat simpler table of incentives based on technology type and customer pay-back period; and (4) to allow greater management flexibility in spending the energy efficiency funds collected from customers through its energy surcharges under Schedule 91. One of the results of these proposed changes is that the number of tariff sheets in Schedule 90 are reduced by two-thirds, from 18 pages to 6 pages, even while increasing the number and type of technologies offered.
The Company believes that providing a wide range of efficiency measures to each of ten customer segments rather than continuing to offer specific technologies in a fragmented manner to individual customer classes “will enhance energy efficiency promotion in an equitable and effective manner.” Customer segments are groups of customers defined by common characteristics such as facilities and energy usage. The customer segments identified are agriculture, education, food service, health care, hospitality, limited income, manufacturing/ public works, office, residential and retail. All customers buying electricity under the various customer class rate schedules would be eligible for efficiency measures under one or more customer segments.
This filing modifies Schedule 90 existing products and services and adds several new efficiency measures of which two have not traditionally been included in utility demand side management (DSM) programs: (1) Assistive Technologies for physically or mentally challenged customers to improve the safety and efficiency of their electricity usage, and (2) Distributed Renewable Energy resources (based on solar, wind and geothermal) to be owned by customers and that would displace Company generated electricity load.
This filing replaces measure-specific customer incentives and project caps with a single, somewhat simpler table of incentives and caps. Most customer incentives would be capped at 50% of project costs, but new technologies, including Distributed Renewable Energy, would have a higher cap at 75% of project costs. Within the caps, specific incentives are disaggregated by three broad measure types and three pay-back periods. The Company states that new technologies and longer pay-back periods require higher incentives. The proposed incentive amounts range from a low of $.01 per first year kWh saved for fuel conversion projects with a customer pay-back between 24 and 48 months to a high of $.14 per kWh saved for new technology projects with at least a 72 month customer pay-back.
Increased management, budgetary flexibility can be achieved, the Company contends, by replacing existing annual caps for the various measures with guidelines that show an “expected” distribution of expenditures over broad categories. Avista says the budget is “intended to have some flexibility based upon the relative opportunities and successes in each program, customer segment or technology.” The categories and their expected shares of funding are as follows: Commercial and Industrial classes would get 50%; Residential (regular and limited income) customers would get 20%; Regional efforts such as the Northwest Energy Efficiency Alliance would get 20%; and Site-Specific Service Agreements, primarily industrial and commercial, would get 10%.
The Company proposes no change in its overall cost-effectiveness evaluation standards. There is no revenue or rate change associated with this filing. The funding for programs is provided through Schedule 91. The Company acknowledges that it remains responsible for achieving and demonstrating through monitoring and evaluation, the cost-effective reduction of kilowatt hours based on the revenues obtained from Schedule 91.
Commission Notices of Application and Modified Procedure in Case No. AVUE994 were issued on July 29, 1999. The deadline for filing written comments was August 20, 1999. The Commission Staff was the only party to file comments.
The Company’s proposal in this case to replace prescribed program funding levels with a table of incentives based on measure type and customer payback, Staff states, provides a generic method of establishing customer funding levels. The challenge as always, Staff contends, will be to accurately estimate costs and savings to determine simple payback. This will be particularly true, Staff contends, as the Company introduces new products that have not been traditionally provided through DSM programs, provides non-monetary incentives to customers, and applies traditionally prescribed efficiency measures across diverse customer segments. The proposed change in focus in Schedule 90 from prescriptive energy efficiency measures to energy efficiency opportunities and customer segments, Staff contends, has the general effect of increasing uncertainty with respect to energy savings and funding levels.
Of particular concern to the Staff in this case is the Company’s proposal to provide incentives for customer-owned distributed renewable generation resources such as solar, wind and geothermal projects. While Staff does not dispute the load reducing effect of these resources, Staff notes that the Company’s existing net metering tariff Schedule 62F essentially provides payment for generation from these types of projects at retail rates. Payment of retail rates that include recovery of non-generation costs or otherwise exceed the Company’s avoided cost, Staff contends, already provides incentive to customers for these types of projects. At the very least, Staff contends that the Company should include incentives provided to customers under the net metering tariff in its determination of DSM measure cost effectiveness.
Staff believes that the importance of program evaluation will significantly increase with the increased flexibility provided under the new Schedule 90 tariff. Noting that the Company continues to remain responsible for demonstrating that its DSM programs are a cost effective use of Schedule 91 revenues, Staff recommends that the revised Schedule 90 DSM tariffs be approved. Staff recommends that during the first year, the Company be required to provide quarterly reports to the Commission detailing activities in each customer segment and for each measure. More specifically, Staff recommends that the Company include any incentives provided to customers through the Net Metering Schedule 62F tariff in its cost effectiveness determination of the Distributed Renewable Energy measures. Finally, Staff recommends that the annual budget table shown in the tariffs reflect Idaho-specific revenues from Schedule 91 rather than total Company revenues.

COMMISSION FINDINGS
The Commission has reviewed and considered the Company’s proposed revisions to its Schedule 90 Electric Energy Efficiency Program Tariff. The Commission has also considered Staff’s analysis and recommendations in this matter. The Commission continues to find that the issues presented are suitable for processing under Modified Procedure, i.e., by written submission rather than by hearing. Reference IDAPA 31.01.01.204.
The Commission finds the Company’s proposed changes to its Electric Tariff Schedule 90 to be both innovative and sensible. We support the Company’s efforts to simplify its tariffs and to increase availability of products and services. We trust that the change in approach will prove to be of benefit to both the Company and its customers.
The Commission also finds it reasonable, however, to adopt Staff’s recommendations, as set forth above, and to require the Company to make related changes regarding reporting, Distributed Renewable Energy measure cost-effective analysis and Idaho DSM budget clarification. We share Staff’s concerns regarding the sweeping nature of the proposed changes as they might affect the Company’s ability to determine energy savings and appropriate funding levels. We are encouraged by the Company’s proposal to closely monitor its DSM programs. The Company remains responsible for demonstrating that its Schedule 90 DSM programs are a cost effective use of its Schedule 91 DSM surcharge revenues. The Company has requested an effective date of August 30, 1999. The Commission finds the proposed effective implementation date to be reasonable.

CONCLUSION OF LAW
The Idaho Public Utilities Commission has jurisdiction over this matter and Avista Corporation dba Avista Utilities—Washington Water Power Division, an electric utility, pursuant to the authority and power granted under Title 61 of the Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.

O R D E R
In consideration of the foregoing and as more particularly described and qualified above, IT IS HEREBY ORDERED that the Application of Avista Corporation dba Avista Utilities—Washington Water Power Division for authority to revise its Schedule 90 Electric Energy Efficiency Programs Tariff is approved for an effective date of August 30, 1999.
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. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
day of August 1999.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

vld/O:AVU-E-99-4_sw

ORDER NO. 28138 1

Office of the Secretary
Service Date
September 2, 1999