20041207Brilz Direct.pdf

Idaho Public Utilities Commission
Office of the SecretaryRECEIVED
DEC - 6 2004
Boise, Idaho
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. IPC-04-
IN THE MATTER OF THE
APPLICATION OF IDAHO POWER
COMPANY FOR AUTHORITY TO
REVISE THE ENERGY EFFICIENCY
RIDER TARIFF SCHEDULE 91
IDAHO POWER COMPANY
DIRECT TESTIMONY
MAGGIE BRILZ
December 2004
occupation.
Please state your name address, and present
Please state you name and business address.
My name is Maggie Brilz.My business address
is 1221 West Idaho Street, Boise, Idaho.
By whom are you employed and in what
capaci ty?
I am employed by Idaho Power Company as
Director of Pricing.
Please describe your educational background.
In May of 1980 I received Bachelor of Arts
Degrees in Economics and Psychology from Smith College in
Northampton, Massachusetts.In 1998 I completed the
University of Idaho's Public Utilities Executive Course in
Moscow, Idaho.I have al so attended numerous seminars and
conferences on pricing issues related to the utility
industry and have attended seminars and courses involving
public utili ty regulation.
Please describe your business experience wi
Idaho Power Company.
I started employment wi th Idaho Power Company
in November of 1984 as a Financial Analyst in the Planning
Department.In 1986 I was promoted to the position of Rate
Analyst in the Rate Department.My duties as a Rate Analyst
included the development of alternative pricing structures,
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Idaho Power Company
the analysis of the impact on customers of rate design
changes, the preparation of cost-of-service studies, and the
administration of the Company I s tariffs.In July of 1993 I
In that capaci ty Iwas promoted to Rate Design Supervisor.
also became responsible for the overall rate design
acti vi ties of the Rate Department. In October of 1996 I was
promoted to my current posi tion of Director of Pricing in
the pricing and Regulatory Services Department.
What is the scope of your testimony in this
proceeding?
My testimony will address the Company I
proposal for increasing the Energy Efficiency Rider amount
from the current level of 0.5% to an amount sufficient to
fund the 2004 Integrated Resource Plan (IRP) identified
demand-side management (DSM) programs, other customer-
focused energy efficiency programs, the Company s continued
participation in the Northwest Energy Efficiency Alliance
(Alliance), DSM research and studies, and incremental DSM
administrative costs. My testimony will also address the
Schedule 19 conservation program developed in compliance
with Commission Order No. 29505 issued in the Company
recen t general rate case.
Will your testimony describe each of these
proposed programs?
No. Mr. Tatum describes each of these
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Idaho Power Company
programs in his testimony and provides information on the
proj ected program costs and the program cost-effectiveness.
Please explain how the current Energy
Efficiency Rider came into being.
In Order No. 28722 issued in Case Nos. IPC-
01-07 and IPC-01-11, the Company s 2001-2002 Power Cost
Adjustment (PCA) case, the Commission directed Idaho Power
to develop and file a comprehensive DSM program to provide
customers wi th the opportuni ty to reduce electric
consumption.The Company complied wi th the Commission
directive through a filing made on July 31, 2001, which the
Commission docketed as Case No. IPC-01-13.In the
compliance filing the Company identified a number of
potential DSM programs that could be implemented to assist
customers in reducing their bills and proposed that the
expenditures for the analysis and implementation of energy
conserva tion programs be funded through a charge known as
the Energy Efficiency Rider (Rider)On November 21, 2001
the Commission issued Order No. 28894 directing the Company
to implement limited DSM programs for the 2001-2002 winter
heating season and to organize the Energy Efficiency
Advisory Group (EEAG) to advise the Company on the
Through Order No.implementation of long-term DSM programs.
28894 the Commission postponed the consideration of funding
of DSM programs until the Company s 2002-2003 PCA filing was
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Idaho Power Company
In Apr i 1 2002 the Energymade in the spring of 2002.
Efficiency Advisory Group, comprised of members from the
Company s customer groups, from special interest groups,
from Commission Staff, and Company personnel, was formed.
On May 13, 2002, the Commission issued Order No. 29026
authorizing the implementation of the Energy Efficiency
The Rider amount forRider as a means to fund DSM programs.
each customer class targeted a level approximately equal to
5 percent of overall class revenue.For the residential
class, the Rider was set equal to $.30 per customer per
For all other customer classes the Rider wasmonth.
established as a cent per kilowatt-hour (kWh) charge for all
billed kWh, except for the irrigation class; the Rider was
capped at $15.00 per meter for irrigation customers.On an
annual basis, approximately $2.6 million is currently
collected through the . 5 percent Rider.
Please describe some of the DSM programs that
have been funded with the Rider since 2002.
Since 2002, the Rider funds have supported
such programs as a Compact Fluorescent Light bulb (CFL)
lighting program for residential and small commercial
customers, the Industrial Efficiency Program for customers
with basic load capacity of 500 kW or greater, the
Irrigation Efficiency Program, the AC Cycling pilot Program
for residential customers, the Irrigation Peak Clipping
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Idaho Power Company
Pilot Program, and numerous small projects, energy
efficiency training seminars, and education workshops and
A complete description of the programs fundedscholarships.
by the Rider during 2002 and 2003 can be found in the
Demand-Side Management Annual Reports for 2002 and 2003
incl uded in Exhibi t No.1 to my tes timony
What is the amount of annual funding required
to support the 2004 Integrated Resource Plan identified
programs, other customer-focused programs, the Company
participation in the Northwest Energy Efficiency Alliance
(Alliance), DSM research and studies, and administrative
costs as described by Mr. Tatum?
Mr. Tatum s Exhibit No.5 details the
expected expendi tures for DSM programs through 2009.As can
be seen from this exhibi t, the expected program expendi ture
for 2005 is $6,490,040 and the expenditures increase each
year reaching $12,815,547 to be spent in 2009. The total DSM
program cost for the five-year period is approximately $53
million.
What is your proposal for increasing the
Rider in order to support the expected program expendi tures?
I propose the Rider be increased from the
current 5 percent level to 1.5 percent beginning June
2005 and to 2.4 percent beginning June 1, 2007.Exhibi t No.
2, page 1, details the expected annual program costs, the
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Idaho Power Company
anticipated Rider funding at the recommended levels, and the
Rider fund balance remaining at the end of each year through
As can be seen from this exhibi t, it is anticipated2009.
that the Rider account will have a balance at year-end 2004
of approximately $4.5 million.This anticipated balance has
been taken into consideration in the determination of the
proposed funding levels.
Page 1 of Exhibi t No.2 identifies a small
deficit in the Rider fund balance for 2009.Please explain
why you are recommending a proposal that does not provide
funding to support the total cost for the identified DSM
programs over the five-year period.
One of the goals in establishing a new
funding level for the Rider is to minimize the variability
in the rate paid by customers from year to year while at the
same time minimizing any fund surplus or defici t that may
The recommended proposal to increase the Rideraccumulate.
in 2005 and again in 2007 minimizes the number of rate
changes needed to fund the identified programs and, al though
it results in a small projected deficit in 2009, minimizes
the fund surplus.
Did you reVlew a scenario that would
accommodate just one change to the Rider during the five-
year period?
I evaluated the scenario in which theYes.
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Idaho Power Company
Rider amount would increase to 2 percent beginning June
2005. A 2 percent Rider coupled with the $4.5 million year-
end 2004 balance would provide just slightly less than the
total amount of funding needed to support the targeted DSM
programs through 2009. The details of this scenario are
included on page 2 of Exhibi t No.
Why did you choose not to select this
alternative?
Although this scenarlO requires just one rate
change and provides a constant funding level over the
targeted five-year period, it results in a significant
funding surplus through 2008, wi th the surplus in 2006
exceeding $5,900,000. In addition, this scenario results in
a projected deficit in 2009 of about $450,000.Due to what
I consider to be an unacceptable level of surplus generated
by this scenarlO, along with the relatively high deficit in
2009, I chose not to recommend this alternative.
Are you recommending that the proposed Rider
funding expire at the end of the five-year period, or on
December 31, 2009?
I am recommending that the 2.4 percentNo.
Rider which I have proposed become effective on June 1, 2007
remain in place until it is determined that a different
funding level is appropriate as a result of a proceeding
before the Commission.
BRILZ, Di
Idaho Power Company
Please explain why you are taking into
account only the first five years of proj ected program
expendi tures, particularly when the IRP planning horizon
encompasses a ten-year time frame.
The IRP identified programs are targeted to
be in full operation at the end of 2009.After the five~
year period, the annual costs for the identified programs
stabilize. Establishing a Rider amount sufficient to support
the identified programs over the five-year implementation
period provides the funding certainty needed by the Company
to undertake the level of expendi tures required to fully
launch the targeted programs.
Since the IRp-related DSM programs as well as
the other customer focused programs are intended to be in
place for more than five years, what do you propose
regarding a review of the adequacy of Rider funding at the
end of the five-year period?
There are several issues that may affect the
adequacy of the proposed Rider funding by the end of the
five-year period.First, due to the nature of DSM programs
and the inherent risk that customers either will not choose
to participate at the target level or will choose to
participate at a level greater than the target, the
estimated program costs used to determine the required
funding level may be overstated or understated.Second, the
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Idaho Power Company
Company will file its next IRP in 2006.To the extent that
addi tional DSM programs are selected as part of the
preferred resource portfolio, an addi tional adjustment to
And third, the Company s currentthe Rider may be needed.
contract with the Alliance ends December 31, 2009.Al though
the Company would likely continue its involvement wi th the
Alliance past this date, this timing will provide the
opportunity to once again evaluate the benefits of continued
Given these various issues, the Companyparticipation.
plans to moni tor the adequacy of Rider funds on a periodic
If an adjustment to the funding level needs to bebasis.
made at the end of the five-year period, or sooner, the
Company will file a request with the Commission to balance
the account.
How do you propose to collect the Rider funds
from the various customer classes?
I propose that each customer pay an amount
that is equal to 1.5 percent and then to 2.4 percent of base
revenue beginning June 1, 2005 and June 1, 2007,
respectively.This charge would be applied to all bills for
retail sales delivered to Idaho customers via the Company
distribution system.
Have you prepared an exhibi t that detai 1 s the
funding to be collected from each customer class under your
proposal?
BRILZ, Di
Idaho Power Company
Exhibi t No.3 details the annualYes.
funding to be provided by each customer class. As can be
seen from Exhibi t No.3, the 1.5 percent Rider is expected
to provide $7,680,965 annually; the 2.4 percent Rider is
expected to provide $12, 289, 543 annually.
Are you proposing any changes to the way in
which the Rider is applied to customer accounts?
Currently, the Rider is established asYes.
a cents-per-kWh charge.I am recommending that it be
changed to a percentage of base revenue.
Why are you proposing the Rider be changed
from a cents-per-kWh charge to a percentage of base revenue?
Each of the DSM programs selected as part of
the IRP portfolio has a component that at least in part, if
not in whole, targets a reduction in peak demand. Because of
the capaci ty component of these programs, and because the
IRP-related DSM programs comprise such a large percentage of
the total DSM programs targeted for implementation, I
believe it is appropriate to recover program costs based on
the customers ' total base revenue rather than only on the
energy component of customers ' bills. A Rider based on the
total base revenue recognizes both the capacity and energy
utilized by a customer and more equi tably recovers the DSM.
program costs.
Are you proposing that all customer classes
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Idaho Power Company
be assessed the Rider based on the total monthly billing for
the base rate charges?
I am recommending that each cus tomer,Yes.
regardless of the service schedule or special contract under
which service is taken, be charged a monthly Rider amount
equal to 1.5 percent of the total charges for the base rate
components beginning June 1, 2005 and increasing to 2.
percent beginning June 1 , 2007.
Currently, each residential customer pays a
flat 30~ charge per month regardless of the amount of energy
Are you proposing that all residential customersconsumed.
continue to pay a fixed amount each month?
I am proposlng that eachNo, I am not.
residential customer pay a monthly amount based on the total
billing for the base charges. For the average customer, the
monthly charge would be $. 85 at the 1. 5 percent level and
$1.36 at the 2.4 percent level.
Why are you proposing that each residential
customer pay based on the total billing rather than continue
to pay a flat charge?
Approximately 83 percent of the expected D~M-
related expenditures through 2009 are for programs selected
These programs are designed as systemthrough the IRP.
As such it is appropriate for the cost of theresources.
resources to be paid based on consumption, just as supply-
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Idaho Power Company
side resources such as power plants and fuel are recovered
from customers based on consumption.Applying the Rider
charge to the total base revenue rather than maintaining a
flat charge per customer will recover a larger portion of
the cos ts from those cus tomers who use more energy,
mirroring the method in which supply-side resource costs are
recovered.
Currently, the Energy Efficiency Charge for
any single irrigation service point or meter is capped at
Are you recommending that this cap continue?$15 per month.
I am recommending that each irrigationNo.
customer pay a monthly charge based on the total billing for
the base charges.
Why are you proposing that each irrigation
customer pay based on total energy consumption rather than
capplng the charge at $15 per meter as is currently the
case?
My primary reason for recommending that
irrigation customers pay the Energy Efficiency Charge based
on total consumption is the same as the reason I expressed
earlier in support of my recommendation for the residential
That is, given that approximately customer class.
percent of the expected DSM-related expendi tures through
2009 are for programs selected through the IRP, I believe it
is appropriate for the cost of the resources to be paid on
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Idaho Power Company
the basis of consumption, just as the costs associated wi
supply-side resources are recovered from customers based on
In addition, two of the six IRp-relatedconsumption.
programs are designed specifically for the irrigation class.
As such, irrigation customers have the opportunity to
benefit from participation in either of the two DSM
programs.
What will be the impact of your proposed
Energy Efficiency Charge to irrigation customers?
To determine the potential impact to
irrigation customers of my recommendation to have the Energy
Efficiency Charge apply uniformly to each customer based on
total base revenue, I reviewed the bill frequency data for
2002 which was provided in response to a production request
in the Company s recent general rate case (Case No. IPC-
03-13; Response to Third production Request of Commission
Staff, Request No. 79). On an annual basis, over 90 percent
of the Company s irrigation customers use less than 50,000
kWh per month, wi th almost 50 percent of irrigation
customers using 5,000 kWh a month or less.At the 50, 000
kWh per month level , assuming a billing demand of 140 kW,
the total monthly Rider payment would be $ 33 . 09 beginning
June 1, 2005 and $52.94 beginning June 1, 2007.Exhibi t No.
4 details the bill frequency data for the months of April
2002 through October 2002 as well as the annual total for
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Idaho Power Company
2002.
If the Commission were to determine that a
continued cap in the monthly Rider payment were appropriate
for irrigation customers, do you have a recommendation as to
how any shortfall in funds should be recovered?
Yes.Should the Commission determine that a
cap lS appropriate, I would recommend that any shortfall in
funds from the irrigation class be recovered on an equal
basis from all other customer classes so that the total
amount of funding necessary to support the identified level
of DSM programs can be achieved.
Are you proposing any changes to the way in
which the Rider funds collected from Schedule 19 customers
are tracked and made available for program implementation?
Yes.In Order No. 29505 issued in Case No.
IPC-03-13, the Commission directed Idaho Power to work
wi th industrial customers and Commission Staff to develop a
conservation program targeted specifically to Schedule
cus tomers Order No. 29505 stated, "the Commission would
like to see a DSM program that allows Schedule 19 customers
to determine appropriate energy conservation improvements to
their own facilities and receive matching funds from their
contributions to Energy Efficiency Rider program to install
the improvements (Order No. 29505, p. 63)In Order No.
29547 the Commission clarified its intent regarding the
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Idaho Power Company
development of a DSM program for Schedule 19 customers and
reaffirmed its directive that the Company develop a program
in conjunction wi th customers and Staff.Regarding the
application of Rider funds, the Commission also clarified
that it intended the customer to pay one-half the cost and
receive matching funds for the other one-half cost, but not
in an amount greater than the customer ' s contributions to
the Energy Efficiency Rider program (Order No. 29547, p.
7 )As a resul t 0 f working wi th Schedul e 19 cus tomers and
Staff, I am proposing that changes be made to the Industrial
Efficiency Program to modify the way in which funds are
tracked and made available for Schedule 19 customers and to
accommodate other changes identified through this process.
Do the changes you are proposing to the
funding structure match the Commission s stated intent
regarding the application of Rider funds for the
installation of conservation improvements?
The parties have identified a fundingNo.
structure which they believe is preferable to the structure
specified by the Commission.
Before you describe the changes you are
proposing, would you please briefly describe the process
undertaken to work with the Schedule 19 customers and
Commission Staff?
On September 13, 2004, a meeting wasYes.
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Idaho Power Company
held at Idaho Power s office to discuss the development of a
DSM program targeted specifically to Schedule 19 customers.
Members from the Energy Efficiency Advisory Group who
represent the Schedule 19 customer class, Commission Staff,
representatives for the Industrial Customers of Idaho Power
(ICIP) , and Idaho Power personnel attended the meeting.
Overall , the parties agreed that the current design of the
existing Industrial Efficiency Program available to Schedule
19 customers allowed sufficient flexibili ty for customers to
customize projects to meet the specifics of their individual
operations.However, four issues related to the program
design were identified by the customer groups during this
First, the customer groups expressed their desiremeeting.
to have Rider funds paid by Schedule 19 customers tracked by
customer, similar to a savings account structure, with 100
percent of the funds in the account made available to the
individual customer for DSM proj ects.In addition, the
customer groups requested the abili ty to combine Rider funds
from mul tiple si tes to fund DSM proj ects. Second, the
cus tomer groups reques ted that there be no minimum payback
period required in order for a DSM proj ect to be approved
Third, the customer groups requested the audi for funding.
provision of the program be expanded.And finally, the
customer groups requested the mechanism for ~alculating the
available incentive amount for a project be simplified.
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Idaho Power Company
Following this meeting, Company personnel worked to address
these issues raised by the customer groups.
Was a redesign of the existing Industrial
Efficiency Program that is satisfactory to the parties
involved in this process achieved?
The parties met again on November Yes.
2004 to review a revised program design that addressed the
issues identified at the September 13 meeting.After
further discussion, the parties reached agreement on the
four issues.
Would you please describe the agreement
reached on each of the four issues?
The parties agreed to restructure theYes.
Industrial Efficiency Program to provide an option for
Schedule 19 customers to designate whether or not they want
to establish an individual account in which to track Rider
payments for direct use by the customer for DSM projects at
the customer s site (this option is defined as "self-
directed"
) .
As part of this option, customers will be able
to combine funds from mul tiple si tes to implement cost-
In addition, the parties agreed toeffective proj ects
eliminate any minimum payback requirement from the program
design wi th the intent to revisi t this issue after one year
in order to determine its effect on the program. The parties
also agreed to expand the audit feature of the program and
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Idaho Power Company
to simplify the mechanism for calculating the incentive
amoun t .
Would you please describe in more detail how
the individual, or self-directed, accounts are intended to
work?
Yes. Funds wi 11 be tracked individually for
each customer as of June 1, 2004 and made available to
customers for use in implementing DSM proj ects as of June
2005.Customers will have until January 1, 2008 to utilize
the funds in the individual accounts for approved proj ects
Any individually tracked funds not utilized for a specific
project by January 1, 2008, will be removed from the
individual account and pooled with the rest of the Rider
funds. Customers will have the flexibili ty to choose ei ther
the new "self-directed" funding option or the existing
cost-share " funding option at the time the customer commi
to implementing an approved DSM proj ect.Once the cus tomer
has made a funding selection, the customer will be required
to continue with that funding option until January 1, 2008.
In addition, beginning June 1, 2005, customers will be able
to utilize for project implementation the amount of funding
expected to be assessed as of January 1, 2008.This
provision allows for an incentive to be paid to the customer
prior to the customer actually paying into the individual
account. Customers who choose to establish individual
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Idaho Power Company
accounts will have the ability to use 100 percent of the
funds in the account towards the implementation of approved,
cost-effective DSM projects.
How will the self-directed option be
structured after January 1, 2008?
The self-directed option will be structured
the same as I have just described, wi th the exception that
the funds will be tracked and made available on the basis of
each subsequent three-year timeframe.
How will funds be available to Schedule
customers who choose not to use the self-directed option?
Customers who choose not to select the self-
directed option will be eligible to receive Rider funding
for approved, cost-effective DSM projects through the cost-
share option which will utilize funds from the overall pool
of Rider funds.
Is the agreement among the parties regarding
the establishment of "self-directed" accounts contingent on
any action of the Commission?
Yes.Throughout the discussions held wi
the parties it has been expressed that the revision to the
Industrial Efficiency Program to include a self-directed
option is contingent upon the Commission s approval of an
lncrease in the Rider from the current . 5 percent amount and
approval of the self-directed funding structure.
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Idaho Power Company
What changes have been agreed upon regarding
the audit provision of the program?
The parties agreed to revise the audi
provision to provide up to $3,000 in Rider funds per year
for a high level audit of the customer s facility with no
obligation on the part of the customer to implement any
measures identified as part of the audi In addi t i on, the
parties agreed to a cost-share provision in which Rider
funds will pay for 50 percent of the cost of a detailed
audit of a project identified in the high level audit,
provided the customer is likely to install the proj ect.The
Rider funds available for a detailed audi t will be limi ted
to $10,000 per customer site once every three years.
Would you please describe the changes made to
the Industrial Efficiency Program to simplify the incentive
mechanism?
The mechanism has been simplified toYes.
provide a cap for the incentive amount under the cost-share
option equal to
$ .
12 per kWh reduced or 50 percent of the
proj ect cost, up to $100,000. For the self-directed option
the incentive cap is equal to 100 percent of the funds
expected to be collected in the individual customer account
Previously the program designthrough January 1, 2008.
included an additional cap and limited the amount of funds
which could be combined from other si tes to 25 percent of
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Idaho Power Company
the calculated incentive amount for qualified projects at
each si te.
What is the role of the EEAG regarding the
Industrial Efficiency Program and the changes you have just
described?
The changes to the Industrial Efficiency
Program will be reviewed with the EEAG at the group
On an ongoing basis, thequarterly meeting in January.
Company will review with the EEAG any additional revisions
to the program which may be suggested in order to receive
input on the program design and implementation.
Are you proposing that the changes made to
the Industrial Efficiency Program that you have just
described be available to the Company s three special
contract customers?
The Company s Industrial EfficiencyYes.
Program is currently available to the three special contract
I recommend that each of the changes I justcustomers.
described, including the self-directed option, also be made
available to the special contract customers.
Are you aware of the level at which other
utilities in the region are funding DSM programs?
In its most recent general rate caseYes.
before this Commission, Avista received authorization to
establish the level for its DSM surcharge at 1.25 percent of
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Idaho Power Company
Both Portland General Electric and Pacificbase revenues.
Power & Light in Oregon assess each customer a Public
Purposes Charge equal to 3 percent of the total revenue
Of the total amount assessed, approximately billed.
percent is earmarked for conservation.
Have you included in the amount to be
collected through the Rider a component for the lost revenue
that will occur as a result of the implementation of the
energy efficiency programs?
There is no component for lost revenueNo.
included in the proposed Rider funding.
Does this conclude your testimony?
Yes, it does.
BRILZ, Di
Idaho Power Company