20040319Hirsh Rebuttal.pdf

William M. Eddie (ISB# 5800)
ADVOCATES FOR THE WEST
O. Box 1612
Boise, ID 83701
[phone]
fax: [phone]
billeddie~m1ci.net
Express Mail:
1320 W. Franklin St.
Boise, ID 83702
,- --, ~ , '" . '-- " -;~_
l"YlL...
19 PI'l 4: 'inf"Hi.Uv-1
" , "" "
UTILlf\F'::; co JS51011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO INCREASE ITS INTERIM
AND BASE RATES AND CHARGES FOR
ELECTRIC SERVICE
CASE NO.
REBUTT AL TESTIMONY OF NANCY HIRSH
ON BEHALF OF NW ENERGY COALITION
IPC- E-03-
ell/GINAl
REBUTTAL TESTIMONY OF NANCY HIRSH
PLEASE ST ATE YOUR NAME, BUSINESS ADDRESS AND POSITION
WITH THE NW ENERGY COALITION.
My name is Nancy Hirsh. My business address is 219 First Ave. South, Suite
100, Seattle, W A 98104. I am the policy director for the NW Energy
Coalition (NWEC).
HAVE YOU PREVIOUSLY SUBMITTED TESTIMONY IN THIS CASE?
Yes, I submitted direct testimony in this matter. My background and
qualifications, as well as a description ofNW Energy Coalition, are presented in that
prior filing.
PLEASE SUMMARIZE YOUR REBUTTAL TESTIMONY.
A. My rebuttal testimony provides additional infonnation and discussion in support
of the Community Action Partnership Association ofIdaho s (CAP AI's) requested
increase in funding for the Low Income Weatherization Assistance Program. This
testimony also responds to the direct testimony presented by Commission Staff and
AARP with respect to fixed customer charges and rate design.
I. LIW A Funding
Q. HAVE YOU REVIEWED THE TESTIMONY OF TERI OTTENS AND KEN
ROBINETTE?
A. Yes. In different ways, Ms. Ottens and Mr. Robinette make a strong case for
increasing funding of Idaho Power s Low Income Weatherization Assistance (LIW A)
program. Specifically, Mr. Robinette recommends increasing LIW A funding from
Hirsh, Nancy - Rebuttal
NW Energy Coalition
approximately $250 000 to $300 000 annually (in recent years) up to $1.2 million
annually.
Q. DOES NW ENERGY COALITION SUPPORT THIS REQUEST? AND IF SO
PLEASE STATE THE UNDERLYING POLICY REASONS FOR YOUR
SUPPORT.
A. Yes. Electric service is not an optional service in today s society. Electricity
provides refrigeration, heating, cooling and lighting. Children cam10t participate in
school if they have no lights at home by which to do their homework. Home medical
equipment must have reliable electricity service. Using altemative heating and
lighting methods, such as candles, open oven, and space heaters, often pose serious
health and safety problems. Yet, it is established that low and fixed income
households generally pay a greater percentage of their income for utilities.
Well-marketed and promoted weatherization programs can significantly reduce
the energy burden on low and fixed income families. In particular, targeting
weatherization services to customers with high usage and those receiving LIHEAP
bill assistance funds will ensure that weatherization services assist those with the
greatest need.
Low income weatherization is not a social program. It is a cost effective energy
savings program that provides economic and energy benefits to both the customer and
the utility.
Q. WHAT ARE THE BENEFITS TO THE UTILITY OF LOW INCOME
WEATHERIZATION PROGRAMS?
Hirsh, Nancy - Rebuttal
NW Energy Coalition
A. There are cost savings to Idaho Power due to reduced costs of arrearages and
disconnecting and reconnecting customers. Weatherization measures that lower a
customer s bill make it more likely that the customer will make some payment on
current and arreared bills.Below is an excerpt of a paper written by Jerrold
Oppenheim of Democracy and Regulation, in January 2002 for Entergy Corporation
entitled Economics of Low-Income Electricity Efficiency Investment. (pp. 5-
Arrearage reduction (cost of money, uncollectibles, collection costS).2 A
review of studies of arrearage reduction benefits conducted for the
Boston Edison Settlement Board by the Tellus Institute shows that
energy efficiency programs generate reductions in arrearages ranging
from $0 to $469 per participating household.3 An Oak Ridge National
Laboratory study, for example, found an average reduced arrearage value
of $32 per weatherized low-income household relative to program costs
of $1 550.4 Similarly, a study of a Pacific Gas and Electric low-income
weatherization and education program found that reduced carrying
charges on arrearages range between $4 and $63 per weatherized
household.
In Colorado write-offs dropped 18 percent at weatherized homes.
Further, arrearages dropped 26 percent, emergency gas assistance calls
dropped 74 percent, and bills were reduced 22 percent. Total annual
benefit to the utility is estimated at $30.56 per participating household on
a $2417 per household cost, not counting reductions in complaints and
collection costs, increases in comfort and health, and increases in
discretionary income.6 Another study found that all benefits associated
1 Due to the length of the paper, I have not included it as an attachment It can be found at
http://www.democracyandregulation.com!detail.cfm? artid= l4&row=0
See e., Mass. DTE 98-100 Guideline 3.2(e)(i iv). The Massachusetts commission has established
guidelines for assessing cost-effectiveness of utility efficiency programs.
3 Biewald etal.
, "
Non-Price Factors of Boston Edison s Demand-Side Management Programs: A
Review of the Societal Benefits of Energy Efficiency,"(1995), atpp. 14-2 -14-5. The authors issue
numerous caveats regarding the comparison of results from different studies. For example, they cite
differences in the measures installed and information provided through different programs, other
administrative and programmatic distinctions, and variations of benefit measurement methodologies.
4 Linda G. Berry, et aI.
, "
Progress Report of the National Weatherization Assistance Program " at 38, 45
(Oak Ridge National Laboratory, 1997).5 Lisa A. Skumatz, Chris Ann Dickerson
, "
Extra! Extra! Non-Energy Benefits Swamp Load Impacts for
PG&E Program!" 1998 Summer Study on Energy Efficiency in Buildings Proceeding, pp. 8.301-307
(American Council for an Energy Efficient Economy, 1998). (Present values were calculated based on a
ten year lifetime, discounted at four percent annually.
6 J.K. Magouirk
, "
Evaluation of Non-energy benefits from the Energy $avings Partners Program 1995
Energy Program Evaluation Conference, Chicago pp. 155-175 (1995).
Hirsh, Nancy - Rebuttal
NW Energy Coalition
with reduced uncollectibles range between $16 and $58 per weatherized
household.
Massachusetts Electric Co.'s (MECo s) impact evaluation of non-energy
benefits from its Appliance Management Program8 includes a broad
review of the non-energy benefits at efficiency programs that target
customers in arrears as opposed to those programs that do not so target.
The study found that arrearages are reduced as a result of both kinds of
programs but that the targeted programs produce about 9.5 times the
benefit as non-targeted programs. The evaluation also found that
MECO's non-targeted program resulted in average arrearage reductions
of $7.60. Weatherized homes, with larger savings , will reap greater
benefits, $22 (not targeted) to $210 (targeted), on average. For this
analysis, we used the conservative results of an Oak Ridge National
Laboratory Study, $32 savings on a $1550 investment (about two
percent.
Site visits for terminations . reconnections.-11 At least two site visits are
required each time a customer is tenninated for non-payment and then
reconnected. Typically, such site visits cost at least $35. Total savings
then, are the number of tenninations avoided as a result of the program
times $35. MECo assumes the incidence of low-income tennination is
twice that of other residential customers, which is 3 percent. Thus we
compute this benefit (per average participant) as 6 percent times $35 , or
$2.10.
Q. PLEASE COMPARE CAP AI'S REQUESTED $1.2 MILLION LIWA PROGRAM
TO SIMILAR PROGRAMS FUNDED BY INVESTOR-OWNED UTILITIES IN THE
REGION.
A. CAP AI's request is comfOliably within the range of other utilities in this region.
In Oregon, state law requires collection of a total of $6 million per year from Pacific
Power (421 000 customers) and Portland General Electric (645 000 customers)
7 Lisa A. Skumatz (Skumatz Economic Research Associates), Chris Ann Dickerson (PG&E), "Extra! Extra!
Non-Energy Benefits Swamp Load Impacts for PG&E Program!" 1998 Summer Study on Energy
Efficiency in Buildings Proceeding, p. 8.307 (American Council for and Energy Efficient Economy, 1998).
8 Jane Peters et aI.
, "
Final Report: Non-Energy Benefits Accruing to Massachusetts Electric Company
From the Appliance Management Program" (Research Into Action, Dec. 1999).9 At pp. 8-15,
10 L. Berry, M. Brown, L Kinney, "Progress Report of the National Weatherization Assistance Program
(1997).II See fk, DTE 98-100 Guideline 3,2(e)(iii) (Mass.
Hirsh, Nancy - Rebuttal
NW Energy Coalition
customers for investment in low income weatherization services in the service
territory of the two utilities. In Washington, Avista Utilities (219 000 total
Washington customers) invests over $780 000 in limited income weatherization.
Puget Sound Energy (860 000 electric customers) invests $2.05 million per year
(including $300 000 from utility shareholders). In Washington, Pacific Power invests
up to $1 million per year in low income weatherization for its 97 000 customers.
State statute in Montana directs NorthWestem Energy to collect 2.4 percent of retail
revenues for certain system benefits. NorthWestem Energy invests at least $584 000
per year and has 300 000 residential customers.
II. FIXED CUSTOMER CHARGES
Q. PLEASE SUMMARIZE THE TESTIMONY OF AARP WITNESS THOMAS
POWER AND COMMISSION STAFF WITNESS DAVID SCHUNKE WITH
RESPECT TO IDAHO POWER'S FIXED CUSTOMER CHARGE PROPOSALS.
A. Mr. Power, Mr. Schunke, and I all approached the issue of fixed customer charges
in a similar manner. We all attempted to identify specific costs which could be
viewed as a "ceiling" for any potential fixed customer charge, and then asserted that
the fixed charge should be lower than the total of those specific costs for various
policy reasons. Mr. Power (at pages 33-34) and Mr. Schunke (at pages 17-18) both
recommend the fixed charge for Schedule 1 customers be increased from $2.51 to
$3.00.
Q. IN YOUR DIRECT TESTIMONY YOU IDENTIFIED A FIXED CHARGE
CEILING" OF $6., WHILE MR. SCHUNKE IDENTIFIED A SIMILAR
AMOUNT OF $4.20. FOR PURPOSES OF THE COMMISSION'
Hirsh, Nancy - Rebuttal
NW Energy Coalition
CONSIDERATION OF THE FIXED CHARGE ISSUE, IS THIS DIFFERENCE
MEANINGFUL IN YOUR VIEW?
A. No. The difference is easily explainable and largely insignificant: I included the
costs of meters and their installation as customer-related costs, and Mr. Schunke did
not. The key point is that we both attempted to use actual facts from Idaho Power
application in this case as a starting point for our analyses. And Mr. Power and I
seem to strenuously agree that Idaho Power s proposed fixed charge of$10 is
unexplainable on the facts the Company has presented.
Furthermore, Mr. Schunke, Mr. Power, and I all agree that sound rate policy
dictates that the fixed charge be set lower than $10, $6., or $4.20. I explained these
policies in my direct testimony and will not reiterate them here.
Q. DO YOU AGREE WITH MR. SCHUNKE'S AND MR. POWER'
RECOMMENDATIONS FOR A $3.00 FIXED CHARGE FOR SCHEDULE
CUSTOMERS?
A. I believe a $3.00 fixed charge is defensible, although even that figure is based on
some degree of guesswork. However, I want to reiterate that the goals largely shared
by Staff, NW Energy Coalition, AARP, and CAPAI - to preserve customer control
over their bills and protect low usage customers from a greater proportional rate hike
- can be best met via the type of rate design proposals put forward in my testimony
and that ofMr. Power and Mr. Schunke. Furthermore, Idaho Power s desire for more
certainty in its collection of the fixed costs of service can be met through the
performance based rate proposal presented by NW Energy Coalition witness Ralph
Hirsh, Nancy - Rebuttal
NW Energy Coalition
Cavanagh. Mr. Cavanagh's proposal also protects customers against potential over-
collection of such costs.
III.BLOCK RATE DESIGN
Q. PLEASE SUMMARIZE THE TESTIMONY OF AARP WITNESS THOMAS
POWER AND COMMISSION STAFF WITNESS DAVID SCHUNKE WITH
RESPECT TO THEIR RECOMMENDATIONS FOR BLOCK RATE DESIGN.
A. Both Mr. Power (at pages 28-31 of his testimony) and Mr. Schunke (at pages 18-
21 of his testimony), recommend block rate designs but differ in details. Mr. Power
recommends a block rate that would apply unifonnly throughout the year, with the
first 600 kWh consumed priced at 4.834 cents per kWh; and all additional kilowatt
hours priced at 6.445 cents per kWh. Mr. Schunke s proposed block rate would
apply only during the summer season, and impose a 20% higher rate on all kilowatt
hours consumed above 800 kWh during that time period. Mr. Schunke s proposal is
more similar to Idaho Power s proposed summer rate.
Q. WHAT IS NWEC'S POSITION WITH RESPECT TO THESE ALTERNATIVE
RATE DESIGN PROPOSALS?
A. As I stated in my direct testimony (on pages 11-12), the Coalition supports
consideration of a minimum block rate design as an altemative to a high customer
charge and as a way to alert customers to the high cost of power during peak load
hours. This price signal must be accompanied with strong energy efficiency and low
income energy services programs to assist customers with high usage in reducing
their consumption and thereby their bill. The Coalition has supported block rate
Hirsh, Nancy - Rebuttal
NW Energy Coalition
proposals and seasonal rate designs in utility proceedings in Washington and Oregon.
The rate design proposal recommended by Mr. Powers reflects a more comprehensive
approach to managing Idaho Power s peak load by recognizing the fact that Idaho
Power s winter peak has been steadily growing and expanding over time. This trend
is likely to continue and should be addressed by the block rate stmcture. For
example, a higher rate second block may encourage more new constmction to use gas
heat and more energy efficient building practices, thereby reducing the winter peale
Q. DOES THIS CONCLUDE YOUR REBUTTAL TESTIMONY?
A. Yes.
Hirsh, Nancy - Rebuttal
NW Energy Coalition