20090501Comments.pdf

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3283
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Street Address for Express Mail:
472 WWASHINGTON
BOISE ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
IDAHO POWER COMPANY FOR AUTHORITY )
TO REVISE THE ENERGY EFFICIENCY )
RIDER, TARIFF SCHEDULE 91 )
)
)
)
CASE NO. IPC-E-09-5
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 30778 on
April 10, 2009, submits the following comments.
BACKGROUND
On March 13,2009, Idaho Power Company fied an Application for Commission
approval of an increase to its Energy Efficiency Rider, Tarff Schedule 91, from 2.5% to 4.75%
of base revenues effective June 1, 2009.
The Energy Efficiency Rider is a Commission-approved means for Idaho Power to fud
most of its demand-side management (DSM), or energy effciency, programs. The Rider as
initially approved in 2002 was designed to collect 0.5% of base revenues and was implemented
as a $0.30 per month charge to residential customers and a cents-per-kilowatt hour charge for all
STAFF COMMENTS 1 MAY 1,2009
other customer classes, with irrigation customer charges capped at $15.00 per month per meter.
In 2005, the Commission approved an increase in the Rider to 1.5% of base revenue applied
uniformly to all customer classes, with residential charges capped at $1.75 per month per
customer and irrigation charges capped at $50.00 per meter per month. The curent
Commission-approved Rider is 2.5% of base revenue, with no caps for any customer classes.
The curent Rider, in effect since June 1,2008, collects about $17.4 milion per year for
Idaho Power's DSM programs. Exhibit NO.2 fied with the Application assumes a 4.75% Rider
effective June 1,2009, to forecast Rider revenues of $27.3 millon in 2009 and $33.2 milion in
2010 and in 2011, for a total of$93.7 milion over the three-year period.
The Company's Application states that DSM program expenditures for 2009 are expected
to be $29.7 milion in 2009, $29.5 milion in 2010 and $31.8 milion in 2011, for a total of$91.0
millon. i At the end of2008 the Rider account had a deficit balance of$3.9 millon. The sum of
2009-2011 projected expenses and last year's deficit balance is $94.9 milion versus $93.7
milion of projected Rider revenue if the Rider is increased to 4.75% effective June 1,2009,
leaving a projected Rider deficit of $1.2 milion at the end of 2011 (as shown in Table II of the
Application's Exhibit No.2).
IDAHO POWER'S DEMAND-SIDE MANAGEMENT (DSM) PROGRAMS
Mr. Timothy Tatum's testimony submitted with the Application included Idaho Power's
Demand-Side Management 2008 Annual Report as Exhibit NO.1. This Report contains a wealth
of information regarding the Company's DSM programs, including customer participation, costs
and funding sources, energy and demand savings, benefit/cost ratios, program histories, 2008
activities, and 2009 strategies.
Staffs Attachment A lists Idaho Power's Rider-funded programs, expenses for 2008 per
the above described DSM Report, and recently updated projected expenses for 2009. Most
programs are expected to have higher paricipation and costs in 2009 than in 2008, while a few
are expected to decrease. As Mr. Tatu explained on page 19 of his testimony, future DSM
expense projections are subject to variables such as future integrated resource plans' (IRP)
identification of cost-effective DSM and willngness and abilty of customers to paricipate in
1 In Idaho Power's response to Staff Audit Request No.4, the Company said it now expects its 2009 Rider-fuded
DSM expenses wil be $32.7 milion (vs. the Application's $29.7 milion estimate). The primar cause of this
changed expectation is higher than anticipated paricipation in the revised Irrigation Peak Rewards program.
STAFF COMMENTS 2 MAY 1,2009
new and existing programs, all of which make projecting precise future DSM expense levels
quite difficult.
It is noteworthy that the 2009 projected DSM expenses in Staffs Attachment A, totaling
$32.5 milion, are nearly $3 milion higher than is shown on Mr. Tatum's Exhibit NO.2. The
discrepancy is per updated projections provided by Idaho Power in response to an audit request
and is primarily due to greater-than-anticipated paricipation in the recently revised Irrgation
Peak Rewards program. The most significant revisions to this program were the addition of a
dispatchable irrigation pump interrption and increased financial incentives for paricipation in
this option. When Idaho Power filed its Application in this Rider case on March 13, it had
anticipated that its costs for the Irrigation Peak Rewards program would increase from $1.4
milion in 2008 to $7.2 milion in 2009, but the Company now estimates that this program will
cost $10.2 milion in 2009. As can be seen on Attachment A, the $8.8 milion dollar expected
increase for this program represents nearly two-thirds of the $13.7 milion expected increase for
the total portfolio of Rider-fuded programs from 2008 to 2009. Staff now expects the Irrigation
Peak Rewards program wil be capable of reducing peak loads by about 200 megawatts (MW).
COST EFFECTIVENESS OF IDAHO POWER'S DSM PROGRAMS
Idaho Power provides cost-effectiveness metrics for each of its programs in the detailed
program descriptions in the 2008 DSM Report, as well as in Appendix 4 of the Report, which
also provides a year-by-year history of program paricipation, costs and benefits. According to
this Report, each ofIdaho Power's major DSM programs in Idaho are expected in the long-ru to
produce more beneficial value in energy savings and/or peak load reductions than the programs
cost, both from the total resource cost (TRC) perspective and from the utilty cost (UCT)
perspective.
2
Idaho Power has completed post-implementation program evaluations for many of its
programs and has used these evaluations to both modify programs and to verify their cost-
2 The TRC perspective compares the value of avoided supply costs to the total of the utilties' DSM program
administrative costs and the direct cost of the measure's labor and materials, including any costs incurred by
customers. In the TRC, utilty incentive payments are viewed as transfer payments and are ignored. The UCT
perspective compares the value of avoided supply costs to the only the DSM costs incurred by the utilty, including
incentive payments to participants and non-incented customer costs are ignored. The UCT is a misnomer in that
customers, not utilties, are ultimately the beneficiaries of programs that pass that cost-effectiveness test.
STAFF COMMENTS 3 MAY 1,2009
effectiveness. It is Staff s understading that the Company is in varous stages of completing
similar evaluations for additional programs.
STAFF ANALYSIS
Staff supported Idaho Power's initiation of its 0.5% Rider and programs in 2002 (Case
No. IPC-E-OI-13), the 2005 Rider increase to 1.5% (Case No. IPC-E-04-29), the 2008 Rider
increase to 2.5% (Case No. IPC-08-03), and supports this increase in the Rider to 4.75% of base
revenues. Staff recognizes that rate increases are especially unpopular during hard economic
times. However, Staff is also aware that even more expensive supply-side alternatives have been
and wil continue to be avoided to the extent that customers use existing electricity resources
more efficiently. Cost-effective DSM, including energy effciency programs and load
management programs, is a significant resource that helps customers control their utilty bils,
reduces the need for higher-cost, supply-side resources, and increases system reliability.
The least costly electricity resource is customers increasing the efficiencies and efficient
use of their buildings, appliances, lights, irrigation systems, and industrial processes without
utilty intervention and administration. Staff believes the second least costly resource is
available when utilities or other entities prudently administer cost-effective programs that
provide monetary incentives and educational opportunities for customers to increase their
efficiencies. The most expensive resources are additional generation, transmission and
distribution facilties, regardless of whether the generation facilities are thermal, hydro, wind,
solar or other alternatives.
In spite of many years of utilty DSM programs, it remains evident that most customers,
left on their own, do not use electricity as efficiently as rational economic theory suggests they
should. Continued less-than-optimum efficiency is probably due to a combination of Idaho
Power's historically low electricity rates, lack of knowledge and misconceptions about
efficiency, and a perceived need for inordinately high implicit discount rates, i.e. individuals and
business often, if not usually, requiring much higher rates of retu for energy efficiency
investments than for competing, alternative investments. This may be due to a skewed
perception of risk, misinformation, and/or other factors. Whatever the reasons, the result is that
Idaho Power's own analyses, as well as regional and national analyses, show that there remain
many efficiency programs that utilties or other entities can administer cost-effectively. Even
though such administration creates additional costs, the programs can be cost-effective to the
STAFF COMMENTS 4 MAY 1,2009
extent that the cash incentives and/or educational efforts result in customers sufficiently
improving their effciencies beyond what they would do without such programs and in amounts
sufficient to cost-effectively recoup the administration costs. Prudently designed and managed
programs are expected to be less costly than curently available supply-side resources and
appropriate post-implementation evaluations should be completed to show the actual cost-
effectiveness achieved and used to fuher improve on-going programs.
As can be seen by the past DSM program detail shown in Attachment A, all customer
classes are receiving benefits from Idaho Power's DSM programs. Precise comparisons among
customer classes of DSM Rider revenue collected, program dollars spent and energy savings
achieved are complicated by several factors, including imprecise allocation of NEE A savings
and by the peak load savings goals of air conditioning cycling and irrigation scheduling
programs.
Staff has reviewed the Application's proposed fuding level and supports Idaho Power's
request to increase its Energy Efficiency Tariff Rider from the curent 2.5% of base revenues to
4.75% of base revenues. However, Staff is cognizant that the proposed 4.75% may prove to be
insufficient to both fund on-going DSM expenses and to recover the current Rider balance
deficit. To the extent the 4.75% Rider proves to be insufficient, Staff believes it is reasonable to
explore other fuding alternatives in the future. Such alternatives may include recovering some
DSM expenses from base rates, such as is curently the case for low-income weatherization.
Another alternative is to capitalize, rather than expense, some DSM costs.
Staff has reviewed the Company's DSM program cost-effectiveness screening method
and believes it is reasonable, although Staff suggests that Idaho Power not ignore perspectives
other than the TRC and UCT. Staff continues to favor broader evaluations that include DSM
cost-effectiveness from the additional perspectives of program paricipants and non-participants.
It is not Staffs intent to validate the Company's cost-effectiveness calculations for any of its
programs at this time, as such validation and additional review occurs during the course of a
DSM prudency review.
STAFF RECOMMENDATION
Staff recommends approval of the Company's request to increase the Energy Effciency
Rider, Tariff Schedule 91, from 2.5% to 4.75% of base revenues effective June 1,2009.
STAFF COMMENTS 5 MAY 1,2009
Respectfully submitted this
i:umisc:commentslipce09.5wsladebab comments
STAFF COMMENTS
¡1f
t day of May 2009.
Q~tWeldon . Stutzman
Deputy Attorney General
6 MAY 1,2009
Idaho Power DSM Rider Expenses
Updated 2009
2008 Reported Budgeted % Change S Change
AC Cool Credit 2,922,985 3,341,588 14% 418,603Attie Insulation Pilot 123,454 379,404 207% 255,950
Ductless Heat Pump Pilot 117,317 New Program 117,317Lighting, residential 1,011,850 1,458,896 44% 447,046
Energy House Calls 448,992 313,710 -30% -135,282Energy Star Homes 294,579 342,669 16% 48,090Heating & Cooling 466,094 704,066 51% 237,972Home Products 245,219 580,641 137% 335,422
Home Weatherization Pilot 51,670 171,102 231% 119,432Rebate Advantage 79,547 83,713 5% 4,166
~~fri~era_tor _Recyclinß. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 41~,9,!?_ ~ew_ Pr~gra~ _ _ _ 41~,9~7
Residential Total 5,644,390 7,910,053 40% 2,265,663
Comm. Bldg. Effie. 1,006,025 857,588 -15% -148,437
Comm. Demand Response 299,395 New Program 299,395Easy Upgrades 2,922,340 3,408,958 17% 486,618Holiday Lighting 28,782 51,467 79% 22,685Small Comm. AC Cycling 301,781 New Program 301,781
Custom Efficiency 3,948,617 5,456,819 38% 1,508,202- - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --Commercial/lndust. Total 7,905,764 10,376,008 31% 2,470,244
Irrigation Efficiency 1,878,960 1,564,439 -17% -314,521
Irrig. Peak Rewards 1,373,855 10,186,954 641% 8,813,099- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --Irrigation Total 3,252,815 11,751,393 261% 8,498,578
NW Energy Eff. Alliance (NEEA) 894,913 890,871 0% -4,042Residential Educ. 142,969 153,335 7% 10,366
Commercial Educ. 69,059 115,729 68% 46,670Distribution Effie. 135,788 0 -100% -135,788Local Efficiency 22,714 14,000 -38% -8,714- - - -- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - --
Other Program Total 1,265,443 1,173,935 -7% -91,508
Total Direct Programs (above)
Indirect Program Admin.
Total Rider-Funded Expenses
18,068,412
811,863
18,880,275
31,211,389
l,~32,041
32,543,430
73% 13,142,977
64% 520,178
72% 13,663,155
2009 Projected Base Revenues and Rider Expenses
Updated 2009 Rider Share of
Order No. 30754 Rider Est. Expense % of Rider Share of Base
Base Revenues Expenses Base Rev. Expenses Revenue
Residential $ 327,626,707 $ 7,910,053 2.4% 24% 47%
Commercial/Industrial $ 290,891,988 $ 10,376,008 3.6% 32% . 42%
Irrigation $ 81,668,308 $ 11,751,393 14.4% 36% 12%All Other, incl. Admin., NEEA $ 2,505,976 8%- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- --Updated Total for 2009 $ 700,187,003 $ 32,543,430 4.6% 100% 100%Audit Req. NO.4 Update $ 32,700,000
Note: Residential DSM above excludes $1.4 millon in base rates for low-income weatherization.
AftchmentX
Case No. IPC-E-09-5
Staff Comments
05/01109
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 1ST DAY OF MAY 2009, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO.
IPC-E-09-05, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
LISA D NORDSTROM
BARTON L KLINE
IDAHO POWER COMPANY
POBOX 70
BOISE ID 83707-0070
E-MAIL: lnordstrom(ßidahopower.com
bkline(ßidahopower.com
TIMOTHY TATUM
JOHNRGALE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: ttatum(ßidahopower.com
rgale(ßidahopower.com
~~
SECRETARY
CERTIFICATE OF SERVICE