avue994.swrl.doc

SCOTT WOODBURY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 1895

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

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 PROPOSAL REVISIONS AND CHANGES TO ITS SCHEDULE 90 ELECTRIC ENERGY EFFICIENCY PROGRAMS-IDAHO TARIFF. )
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CASE NO. AVU-E-99-4

COMMENTS OF THE COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its Attorney of record, Scott Woodbury, Deputy Attorney General, and in response to the Notice of Application, Notice of Modified Procedure and Notice of Comment/Protest Deadline issued on July 29, 1999, submits the following comments.

COMPANY FILING
On July 2, 1999, Avista Utilities filed a comprehensive revision of its Schedule 90 Electric Energy Efficiency Programs Tariff with the Idaho Public Utilities Commission (Commission). In its Application, Avista proposes to “realign the Company’s energy efficiency programs with customer markets.” To that end the Company has replaced its 18 page tariff of conservation programs categorized by function with a 6 page tariff categorized by customer segments that are defined by common characteristics such as facilities and energy usage. The customer segments include residential, limited income, office, manufacturing, education, health care, food services, hospitality, agriculture and retail.
The Company proposes that some combination of 15 broad based measures be available to each customer segment with incentives dependent upon simple payback from the customer perspective. Some of the broad measures include appliances, motors, HVAC, lighting and new technologies. The Company does not propose any change in the overall cost effectiveness standards. The Company believes that the redesign will make the tariffs more “customer friendly”, it will allow “the funding incentive list to be separately grouped for ease of flexibility” and it will “enhance energy efficiency promotion in an equitable and effective manner”.

STAFF ANALYSIS
After comparing the existing Schedule 90 to the Company’s filing in this case, Staff believes that the revision provides the following general impacts: 1) it allows the Company to change its energy efficiency focus from specific technologies to various customer segments; 2) it allows the Company to modify and add to the list of available products and services; 3) it replaces prescribed measures and customer incentives with a somewhat simpler table of incentives based on general technology type and customer payback periods; and 4) it allows the Company greater management flexibility in spending the energy efficiency funds collected from customers through its Schedule 91 energy surcharges.
Specifically, the proposed revision replaces the 11 technology-specific, energy efficiency programs with 10 customer segments and 15 broad measures. Under existing tariffs, the availability, eligible measures and funding levels are all prescribed for each program. Under the proposed tariff, the broad energy efficiency measures, composed of eligible measures prescribed under current programs and of newly proposed measures, are potentially available to all customer segments. For example, 8 of the 15 proposed measures are included in existing programs yet may be currently limited in availability to selected customer groups.
The new efficiency measures proposed by the Company in this case target Assistive Technologies used by the physically and mentally challenged, Distributed Renewable Energy, Maintenance protocols, Appliances, Monitoring for energy usage, Shell or Building Envelope Efficiency and Sustainable Building Efficiency in design, construction or use. The first two measures listed have not traditionally been included in utility, demand side management (DSM) programs and therefore, introduce uncertainty regarding overall opportunity for savings, what these measures might cost, and how much savings might be achieved. In fact, the focus on energy efficiency opportunities in customer segments rather than on prescriptive energy efficiency measures all appear to increase uncertainty with respect to energy savings and funding levels.
Perhaps the most significant change proposed is the move from measure-specific customer incentives and caps to a table of incentives and caps based on customer payback. Most of the customer incentives will be capped at 50% of total project cost as determined by the Company based upon industry standards. New technologies will be capped at 75% of project cost. The proposed incentive amounts are divided into 3 broad measure types: 1) Electric Efficiency; 2) New Technology; and 3) Fuel Conversion. The proposed incentive levels range from a low of 1 cent per first year kWh saved for fuel conversion projects with a customer payback of 24 to 48 months to a high of 14 cents per kWh saved for new technology projects with at least 72-month customer payback. While a table showing incentives based on broad measures and payback may be more easily understood, it may be more difficult to apply given the greater focus on new technologies, the implementation of non-traditional efficiency measures and application of traditionally prescribed measures across diverse customer segments.
One area of particular concern to Staff is the proposal to provide incentives for customer-owned Distributed Renewable Generation resources such as solar, wind and geothermal projects. While the Staff does not dispute the load reducing effect of these resources, we also recognize 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 already provide incentive to customers for these types of projects. At the very least the Company should include incentives provided to customers under the net metering tariff in its determination of DSM measure cost effectiveness.
Another significant revision proposed by the Company is to replace existing annual funding caps for the various measures with annual budgets that show an “expected” annual distribution of expenditures over broad categories. The categories and annual funding percentages are as follows: Commercial and Industrial classes at 50%, Residential customers at 20%, Regional activities at 20% and Site Specific Agreements primarily with commercial and industrial customers at 10%. Although the categories and budgeted amounts are specifically presented in the tariff, the annual expenditures shown ($4.5 million) represent total Company Schedule 91 revenues rather than the amount that would be available in Idaho.

CONCLUSIONS AND RECOMMENDATIONS
Avista proposes in this filing to reduce its Schedule 90 DSM Tariffs from 18 pages to 6 pages while at the same time expanding both the availability and number of energy efficiency measures offered under the tariff. The Company is able to do this by moving from a collection of highly prescribed DSM programs to a highly flexible program of evaluating end uses and implementing energy efficiency measures.
The Company’s proposal to replace prescribed program funding levels with a table of incentives based on measure type and customer payback provides a generic method of establishing customer funding levels. The trick, as always, is accurately estimating costs and savings to determine simple payback. This will be particularly true 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.
Avista states that the proposed budget is “intended to have some flexibility based upon the relative opportunities and successes in each program, customer segment or technology.” The Company also states that it is not proposing to change its overall cost effectiveness standards and has indicated through the EEE Board that it will evaluate cost effectiveness by both customer segment and technology. Staff believes that the importance of program evaluation will significantly increase with the increased flexibility provided under the new tariffs.
Based on the review of the proposed tariff and the fact that the Company remains 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. The Company indicates that it may file, on a quarterly basis, updates to incentive levels and special agreements. Staff recommends that during the first year, the Company also provide quarterly reports to the Commission or through the EEE Board 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.
Dated at Boise, Idaho, this day of August 1999.

________________________
Scott Woodbury
Deputy Attorney General

Technical Staff: Randy Lobb

SW:RL:gdk/i/word/umisc/comments/avue994.swrl

STAFF COMMENTS 1 AUGUST 20, 1999