20070102Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:SCOTT WOODBURY
DATE:DECEMBER 22, 2006
SUBJECT:CASE NO. IPC-06-32 (Idaho Power)
DEMAND-SIDE MANAGEMENT (DSM) INCENTIVE PILOT PROGRAM
On December 18, 2006, Idaho Power Company (Idaho Power; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) requesting authority to
implement a pilot program that provides for positive incentives (increased revenue or payments)
or negative incentives (reduced revenue or penalties) for achieving, or failing to achieve, agreed-
upon levels of performance in implementing demand-side management (DSM) programs.
Idaho Power proposes that the DSM incentive program first be operated as a pilot
program and only applied to a single DSM program for a three-year period. The Company
Application is separate from but related to the Joint Motion for Approval of Stipulation filed
December 18, 2006 in Case No. IPC-04-15 (Application to Implement a Decoupling
Mechanism.
Proposed Pilot Program
Idaho Power in this Application requests authority to implement a DSM incentive
mechanism which would allow the Company to retain a portion of the cost-reducing benefits
accruing from a DSM program operated by the Company. The incentive would only be earned if
the Company has done an exceptional job in implementing the DSM program. The incentive
mechanism would also allow for a "penalty" payment by the Company if Idaho Power
performance of the selected DSM program falls below previously agreed-upon goals.
. ,
Based on discussions between the parties in the IPC- E-04-15 case workshops, Idaho
Power has selected the ENERGY STARCID Homes Northwest program as the DSM program to be
DECISION MEMORANDUM
used as the pilot to test the efficacy of a DSM incentive program. The ENERGY STAR Homes
Northwest program is currently operated by the Company to acquire the resources identified in
the Residential New Construction Option in the Company s 2004 IRP. The essential feature of
this program is a prescriptive building standard, also called a building option package or BOP
that establishes building standards that will result in approximately 30% greater energy
efficiency than existing Idaho residential building codes. Under the program, the Company
provides an incentive payment of $750 to the builder for each home built to the higher standard
and also provides marketing to encourage participation in the program. The Idaho Energy
Division (lED) certifies that homes are built to the standard and conducts a quality assurance
process. The Northwest Energy Efficiency Alliance (NEEA) provides the builder outreach and
training components of the program. On average, a home constructed to the ENERGY STAR
standard in Idaho will save 2 078 kilowatt hours (kWh) annually as measured at the meter or
305 kWh including line losses. This estimate is based on an engineering simulation study,
conducted for the Company in early 2004 by Ecotope Consulting to determine the program
savings potential in Idaho.
The ENERGY STAR Homes Northwest program, the mechanics of the incentive
program proposed by the Company and the rationale supporting the DSM incentive program are
more particularly described in the testimony of Company witness Timothy E. Tatum filed with
the Application.
Idaho Power is proposing a three-year pilot beginning in 2007 and ending at the end
of2009. Under the pilot the Company would receive an incentive payment if the market share of
homes constructed under the ENERGY STAR Homes Northwest program exceeds: (1) 7% of the
total number of homes constructed in Idaho Power s service area in 2007 , (2) exceeds 9.8% of
total service area homes in 2008 and (3) exceeds 11.7% of total service area homes in 2009.
These percentage levels would be the target goals and if Idaho Power exceeds these targets, it
would receive an incentive payment equal to the percentage benefit that exceeds the target. For
example, if Idaho Power is able to achieve 105% of the 7% target percentage in 2007, Idaho
Power would receive a payment equal to 5% of the total program net benefits. The incentive
program would be capped at 10% of program net benefits. Penalties would be levied for 2007
2008 or 2009 if in any of those years Idaho Power s ENERGY STAR Homes Northwest
program fails to reach the market share of 4.9% achieved in 2006.
DECISION MEMORANDUM
Idaho Power recommends that the Commission process its Application under
Modified Procedure, i., by written submission rather than by hearing. Reference Commission
Rules of Procedure, IDAPA 31.01.01.201-204. The Company stands ready, however, to present
its testimony and support the program in a technical hearing if the Commission determines that
such a hearing is required.
COMMISSION DECISION
Idaho Power has requested that its Application requesting authorization of a three-
year DSM incentive mechanism pilot program be processed pursuant to Modified Procedure.
Staff concurs in the Company s request. Does the Commission agree that Modified Procedure is
appropriate?
Scott Woodbury
bls/M:IPC-O6-32 sw
DECISION MEMORANDUM