The URL can be used to link to this page

Home My WebLink About20061226Weiss direct supporting stipulation.pdfLaw Office of William M. Eddie 610 SW Alder St. Suite 910 Portland, OR 97205 Ph: 503-542-5245 Fax: 503-225-0276 Cell: 208-484-7908 Jean Jewell, Commission Secretary Idaho Public Utilities Commission 427 W. Washington St. Boise, ID 83702-5983 Re: IPC-O4- Dear Ms. Jewell: December 19 2006 1"'-.:1 c:T' r.- ~; ~,,-, - -""- , No~ 0'1 ~~C' u;;Z""' (j) Please find enclosed for filing nine (9) copies of the DIRECT TESTIMONY OF STEVEN D. WEISS ON BEHALF OF NW ENERGY COALITION. I have included a cover page of this document to be conformed and returned to me. Thank you for your attention to this matter. Sincerely, William M. Eddie (") oc"': ~::) ' " '- '. " .-. :. ZO06 DEC 26 A 1"1 8: IDAHO ;:'I\~ UTiLITIES CC;' j;, HSSIGi . BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE INVESTIGATION OF FINANCIAL DISINCENTIVES TO INVESTMENT IN ENERGY EFFICIENCY BY IDAHO POWER COMPANY. CASE NO. IPC-04- DIRECT TESTIMONY OF STEVEN D. WEISS ON BEHALF OF NW ENERGY COALITION PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. My name is Steven Weiss. I am employed by the NW Energy Coalition Coalition ), 219 First Ave. South, Suite 100, Seattle, W A 98104. WHAT EXPERIENCE DO YOU HAVE RELATED TO THIS PROCEEDING? I was the lead staff person at NW Energy Coalition in reviewing filings and proposals in this matter since Idaho Power Company filed their application in January 2006. Prior to that time, the Coalition s Nancy Hirsh and our attorney, William Eddie, had participated in workshops held within this docket. I conferred with Ms. Hirsh and Mr. Eddie, in regard to the Coalition s prior role in this docket. I also have extensive experience regarding decoupling in Oregon and Washington. I was instrumental in negotiating decoupling agreements in Oregon for NW Natural and Cascade Gas companies that were subsequently approved by the Oregon Commission. In addition I am the Coalition s witness in the dockets now awaiting decisions of the Washington Commission for Cascade, Avista and Puget Sound Energy s decoupling proposals. WHAT IS THE SUBJECT OF YOUR TESTIMONY? I will explain and express the Coalition s support for the settlement stipulation Stipulation ) signed December 1 , 2006. PLEASE DESCRIBE THE COALITION'S PAST INVOLVEMENT WITH THIS ISSUE. The Coalition intervened in Idaho Power Company s 2003-04 general rate case (IPC- 03 -13). Ralph Cavanagh presented testimony for the Coalition in that case, urging the adoption of a fixed-cost adjustment mechanism to better align the interests of Weiss, Steven - NW Energy Coalition Idaho Power s customers and shareholders; and Mr. Cavanagh also recommended an exploration of performance incentives to encourage strong performance in demand- side management ("DSM") by Idaho Power Company. Following hearings in that case, NW Energy Coalition, Idaho Power Company, Commission Staff, and the Industrial Customers of Idaho Power entered a "Joint Proposal" committing to work together to resolve issues raised by Mr. Cavanagh's testimony in a workshop setting. The Commission decided in Order No. 29505 that such an investigation should go forward, and specifically ordered: "The parties to the (Joint Proposal) are directed to propose a workshop schedule and initiate a proceeding.Pursuant to that Order, the Coalition filed a petition initiating this docket on June 18, 2004. The Coalition participated fully in the workshop proceedings, which primarily were held in late 2004. Following Idaho Power s application to establish a fixed-cost adjustment mechanism in 2006, the Coalition intervened in this docket and participated in further workshops leading to the Stipulation now before the Commission. WHY DOES THE COALITION SUPPORT DECOUPLING? All ratemaking regulation provides utilities with incentives or disincentives to behave in a certain manner. Ideally, utilities should be rewarded based on how well they meet their customers' energy service needs. But traditional rate design ties recovery of fixed costs directly to commodity sales. This encourages increased use and discourages even the most economical investments if they are likely to reduce throughput. If sales go down, Company shareholders forego cost recovery of recognized and prudent costs with every unsold kilowatt-hour. Under this system supply expansion is the primary response to projected load growth - to the exclusion Weiss, Steven - NW Energy Coalition of investments in energy efficiency, peak load pricing and distributed energy resources. This is economically inefficient because there is a disincentive for the utility to choose the least-cost mix of options to provide energy service or to encourage such investments by customers. This regulatory paradigm places the utility s interest (to increase sales) in conflict with the customers' interest (to reduce their total energy costs). Not only does this foster a corporate culture that opposes direct utility investments in programs that reduce energy use, but also it further motivates the utility to discourage customer- financed reduction measures and to oppose efforts to tighten building codes and appliance standards. Breaking the link between the utility s commodity sales and revenues removes both the utility s incentive to increase energy sales and the disincentive to run effective energy efficiency programs or promote other activities that may reduce load. Decision-making can then focus on making least-cost investments to deliver reliable energy services to customers even when such investments reduce throughput. The result is a better alignment of shareholder, management and customer interests to provide for more economically and environmentally efficient resource decisions. Decoupling is essential to establishing a corporate culture that promotes strong cost- effective conservation investments. A decoupling mechanism is able to do this much more successfully and comprehensively than other alternatives such as high fixed customer charges while, while providing greater assurance of fixed-cost recovery, also provide a poor price signal to customers regarding their energy use. Weiss, Steven - NW Energy Coalition Decoupling is valuable for any utility facing attrition in per-customer use. Due to a variety of factors (including high energy prices, broader use of natural gas as a heating source, Company-sponsored conservation programs, advances in building codes and appliance standards, and new energy-efficient technology) Idaho Power customers are reducing their energy use on a per-customer basis. Without decoupling, this declining usage rate would likely hurt Idaho Power s financial performance in between rate cases. But with decoupling, Idaho Power should be indifferent to declining usage rates. DECOUPLING REMOVES THE COMPANY'S DISINCENTIVE TO ENCOURAGE ENERGY CONSERVATION, BUT DOES IT PROVIDE A POSITIVE INCENTIVE TO ACQUIRE COST-EFFECTIVE CONSERVATION? , decoupling only is intended to make the utility indifferent to changes in energy usage. Therefore in every decoupling proceeding in which the Coalition has been involved, we have conditioned our support on strong, incremental conservation commitments. DOES THE STIPULATION PROVIDE ASSURANCE THAT THE COMPANY WILL CONDUCT STRONGER CONSERVATION PROGRAMS? Yes.At paragraph 8 of the Stipulation, Idaho Power makes a series of unprecedented commitments to enhance its DSM programs (and supporting DSM efforts over which the Company has little or no direct control). The Stipulation provides for thorough reviews of the Company s conservation activities, and includes adequate safeguards to ensure no unintended consequences result from decoupling. These commitments, coupled with the Company s increased portfolio ofDSM Weiss, Steven - NW Energy Coalition programs as reflected in its 2006 Integrated Resource Plan, provide the Coalition with ample assurance that decoupling will create tangible, positive results.The Commission will have an opportunity to review the Company s performance annually, as well as at the end of the three-year pilot period. DOES THE COALITION AGREE WITH THE OVERALL POLICY DIRECTION EMBODIED IN THE STIPULATION AND MR. GALE'S SUPPLEMENTAL TESTIMONY? Yes. In another docket, IPC-06-, the Coalition urged the Commission to adopt rate structures that make Idaho Power Company indifferent to changes in customer loads.The decoupling mechanism proposed in the Stipulation takes a very strong and necessary step toward achieving that policy goal of indifference or neutrality toward changing loads. From this "base" of neutrality, the Commission is well- positioned to acknowledge the Company s enhanced commitments to DSM, and to create incentives for excellent performance in DSM. DO YOU HAVE A SPECIFIC RECOMMENDATION FOR THE COMMISSION? Yes. The Coalition recommends the Commission approve the Stipulation. DOES THIS CONCLUDE YOUR TESTIMONY? Yes. Weiss, Steven - NW Energy Coalition CERTIFICATE OF SERVICE I hereby certify that on this 19 th day of December 2006, true and correct copies ofthe foregoing DIRECT TESTIMONY OF STEVEN D. WEISS were delivered to the following persons via U.S. Mail: Commission Secretary (Nine copies provided) Idaho Public Utilities Commission 427 W. Washington St. Boise, ID 83702-5983 Bart Kline Monica Moen Idaho Power Company O. Box 70 Boise, ID 83707-0070 Peter Richardson Richardson & O'Leary 515 N. 27th St. Boise, ID 83702 William M. Eddie