20100323AARP Comments.pdf

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VI HAND DELIVERY
March 23,2010
Ms. Jean Jewell
Commission Secretar
Idaho Public Utilities Commission
472 W. Washington St.
Boise,ID 83702
Re: Case No. IPC-E-09-28: IN THE MATTER OF THE APPLICATION OF IDAHO POWER
COMPANY FOR AUTHORITY TO CONVERT SCHEDULE 54 --FIXED COST
ADJUSTMENT-FROM A PILOT SCHEDULE TO AN ONGOING PERMNENT
SCHEDULE
Dear Ms. Jewell:
Enclosed, you wil find an origial and seven (7) copies of AA's comments in
response to the Commission's Order 31010 in the above referenced case. Please file stap one
copy for our records.
Please contact me at 208-855-4001 if you have any questions.
Sincerely,~~~
James E. Wordelman
State Director
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION, . ,"
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IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPAN FOR )
AUTHORITY TO CONVRT SCHEDULE 54 )
--FID COST ADJUSTMENT-FROM A )
PILOT SCHULED TO AN ONGOING )
PERMANENT SCHEDULE
Case No. IPC-E-09-28
AARP's COMMENTS IN RESPONSE TO COMMISSION ORDER No. 31010
March 23, 2010
Introduction
Pursuant to Order No. 31010, AA submits the following comments regarding
the application of Idaho Power Co. ("IPC") to Make the Fixed Cost Adjustment
Peranent. AA is a non-profit membership organzation for people aged 50 and
over. AARP has nearly 185,000 members in the State ofIdaho, many of whom are
customers of IPC.
AARP is supportive of giving consumers increased access to meaningfl energy
efficiency programs that wil reduce their energy bils as they reduce their usage. Policies
should incorporate energy effciency into utility planng to ensure that costs are
minzed and that energy savings are genuine and tied directly to utility sponsored
programs. However, energy efficiency programs and policies are not in the best interest of
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consumers if they shift risk to customers and add new fees and surcharges to customer
bils, resulting in higher bils for consumers.
AARP opposes makng the Fixed Cost Adjustment (FCA) peanent and
recommends the Commission abolish the new surcharge. The FCA is a forr of
"decoupling" which guarantees a steady stream of revenue for IPC due lost sales,
regardless of whether sales decrease due to IPC's energy effciency programs or for some
other factor. The FCA is also unfair to low income and low usage customers, who are
less likely to benefit from energy effciency programs, but wil nonetheless pay the FCA.
If the Commission allow the FCA to continue, AA strongly recommends that the
curent discretionar cap on rate increases via the FCA should not be discretionar and
should be both lowered.
Decouplig Should Be Rejected Because it Shifts Risks to Customers
The FCA is described as a tye of "revenue decoupling," which refer to when
regulators sever the relationship between a utility's revenue stream and volumetrc sales.
As acknowledged by the Commission and IPC, under the FCA if sales or consumption go
down IPC is guaranteed to receive the same level of revenue based on fixed cost recover
per customer, as established in the last rate case. Some who favor revenue decoupling
believe a utility wil not implement energy conservation programs unless the company is
made whole for lost revenue resulting from such programs. Under a decoupling scheme,
a surcharge is imposed on electrc customers between rate cases.
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Despite widespread support for energy effciency programs, decoupling has been
controversial around the countr. Decoupling shifts the revenue requirement for a utility
to a fixed charge so that the company's revenue no longer fluctuates with the amount of
electrcity consumed, and the company's incentives to effciently manage its operations
are diminished. Furer, non-usage based surcharges disproportionately impact customers
who are low or moderate user of electrcity, for whom each new surcharge represents a
larger percentage of their bil than for higher usage customers.
There are many factors behind fluctuations in energy usage in addition to IPC's
energy effciency programs. These include: weather, the general state of the economy,
unemployment levels in the utility's serce area, and high fuel prices (which are passed
though to customers on their utility bils). Such exogenous factors influence changes in
demand levels irrespective of conseration programs. It is also diffcult to isolate a drop
in demand due to utility energy efficiency programs from a drop in demand due to these
other factors. Yet, with decoupling, customers could wind up payig for reductions in
usage which occur for reasons wholly unelated to the implementation of energy
efficiency programs. According to IPC witness Sparks, the FCA "is determined by
multiply the weather-normalized energy sales for the year times the fixed cost per energy
("FCE") rate." i In other words, the FCA adjusts only for weather, and does not limit
recovery to only revenue lost due to measurable and verfiable energy savings resulting
from utility-sponsored programs.
i Case No. IPC-E-09-28, Direct Testimony of Scott D. Sparks for Idao Power Company, p. 5.
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Indeed, IDACORP ( IPC's parent corporation)'s recent year-end earngs
statement acknowledges that factors other than its own energy effciency programs
accounted for a reduction in sales: "Idao Power's retail customer sales volumes decreased
four percent in 2009 as compared to 2008. Irgation usage decreased 14 percent prily due to
increased precipitation. Economic factors and energy conseration also contributed to the
reduction in sales volume. ,.2
The Lin Between the FCA and Energy Conservation is Weak at Best
In support of its application, IPC asserts that the FCA has been a necessar factor in
the expansion of the company's energy effciency programs, and is necessar to "remove
the disincentive" for IPC to support energy efficiency programs. AA does not agree
that energy efficiency programs are dependent on the adoption of revenue decoupling, in
Idaho, or elsewhere. Several states have implemented successfu effciency programs by
creating non-utility entities whose sole mission is to improve energy efficiency. In addition,
while some states have indeed adopted "revenue decoupling" other have rejected or
terinated decoupling mechansms, deterg that they were not working effectively,
and/or were overly compensating the utility for decreased usage due to outside factors, such
as the economic downtu. The recent controversy in Ohio over such a rate mechansm
that would have cost ratepayer $21.45 for each compact fluorescet liglt bulb distrbuted
by the utility is a good example of a misguded approach to utility-based energy efficiency
programs.3 Such controveries also sere to erode consumer support for energy effciency
2IDACORP news release: "IDACORP, Inc. Anounces Year-End and Four Quer 2009 Results"
Febru 23,2010
3 See for example, PUCO to hear arguents in light-bulb controversy, Oct 15 - McClatchy-Tribune
Regional News - Betty Lin-Fisher The Akon Beacon Joural, Ohio
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programs that could be designed to be cost effectve and benefit both the consumer and the
utility.
AA appreciates that the FCA mechansm resulted in a credit to customer in
2007. However, the fact that the formula produced a surcharge in a year when IPC spet
$14 millon on energy effciency programs should give pause to those who clai the FCA
is necessar for IPC to engage in energy effciency. Furer, the Commission has taken
other steps specifically designed to decrease energy usage, including new rate designs and
approval ofIPC's request for system wide instalation of advanced meterng infrastrctue
(at a cost to ratepayers of$70 millon). The new rate designs and dynamc pricing under
AMI will result in increased costs to customer who are unwilling or unable to reduce
usage. If these additional costs to consumers work as intended, they will have the impact
oflowerg usage, separate and apar from any impact the FCA mayor may not have on
IPC's willngness to invest in energy effciency programs.
If the Commission chooses to continue the FCA, AA urges that it address ths
problem by redesignng to FCA formula in such a way that recover is limted to sales lost
directly due to measurable and verfiable energy savings resultig only from IPC's energy
effciency programs.
Low Income and Low Usage Customers Are Disproportonately Hit by the FCA
It is obvious that the less energy a customer uses, the fewer opportnities the
customer has to improve efficiency. Moreover, for those same customers each new fee
and surcharge represents a relatively larger bil increase than that same surcharge
represents for higher usage customers. Thus, the FCA is a relatively larger percentage
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increase in bils on those customers who may be unable to benefit from the company's
energy effciency programs. The situation for low income customer is similar. AA
appreciates that both IPC and the Commission recognize that energy effciency effort
must include programs targeted to low income customers. However, it is also not realistic
to assume that all low income households who need energy effciency serces wil
receive them, with many households waiting years before being sered. In the meantime
the low income customers also pay the FCA as yet another add-on to their bils.
The Proliferation of Costs and Fees Based on Energy Efficiency and Conservation
Must Stop
If the Commission does not reject the FCA, AA urges that anual increases to
the FCA be capped at 1.5% and that the cap should not be discretionar on the par of the
Commssion, but included in the tarff. IPC customer already pay one of the higher
energy efficiency riders in the countr, at 4.75% of base revenue. That's a signficant
increase over the fee of 1.5%, which was charged before June of 08. In AA's
experence in other states, most Commissions and Legislatues seek to limit the fees
charged to customers for energy effciency programs, including utility bonuses and
incentives. The increased energy effciency rider and FCA are on top of the additional $10
millon per year that customer will pay for AMI. How much more will be added to the
bottom line of customer bils in the name of energy effciency?
Conclusion
AA supports energy effciency efforts that help consumers both lower their
usage and lower their utility bils. Utilities should be allowed to recover their prudently
incured expenses for approved programs, as well as reasonable incentives that are
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directly tied to the utility's success in meeting or exceeding pre-deterined energy
effciency goals. However, under the FCA, IPC's customers are at risk of falling into a
"save more, pay more" trap where ever escalating add-ons to recover program costs and
utility incentives overhelm any savings consumers could see by engaging in energy
conseration or makng energy efficiency investments. The FCA currently in effect falls
far short of ensuring that IPC is not overly compensated. Indeed, even as it claims a need
for an FCA to cover reduced sales, IDACORP reported an increase in revenues and
earings in 2009 on its recently filed financial statements. AA strongly urges the
Commission to abolish the FCA. Should the Commission continue the decoupling
mechansm, it would be in the best interest of consumers to 1) limit the FCA to recovery
oflost sales directly attbutable to measured and verified energy savigs resulting from
ratepayer fuded energy efficiency programs, and 2) limit the increase in the FCA to no
more than 1.5% each year.
Respectfully Submitted By:
James Wordelman
Senior State Director
AA Idaho
3080 E. Gentr Way, #100
Merdian, ID 83642
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