20100512final_order_no_31080.pdf

Office of the Secretary
Service Date
May 12, 2010
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF IDAHO POWER COMPANY FOR
AUTHORITY TO FUND ITS CONTINUED
PARTICIPATION IN THE NORTHWEST
ENERGY EFFICIENCY ALLIANCE FOR
THE PERIOD 2010-2014
ORDER NO. 31080
CASE NO. IPC-I0-
On February 26 2010, Idaho Power Company and the Northwest Energy Efficiency
Alliance (NEEA) filed a Joint Application requesting authorization for Idaho Power to continue
its participation in NEEA for the period 2010-2014, and that its participation be funded by the
Company s Energy Efficiency Rider. Idaho Power first began participating in NEEA in 1997
and the Commission has allowed the Company to recover its costs in its rates. In May 2005, the
Commission increased Idaho Power s Energy Efficiency Rider so the Company could expand its
energy efficiency programs and continue its membership in NEEA for the years 2005-2009. See
Order No. 29784. In March 2009, the Commission approved a Stipulation finding a portion of
the Company s demand-side management expenses were prudently incurred, and approved
Company fees paid to NEEA through 2007. See Order No. 30740.
The Application describes the main components of NEE A's business plan for 2010-
2014, and identifies NEEA activities that the Company believes benefit its customers, including
(1) a commercial new construction initiative that includes an integrated design lab based in
Boise; (2) an energy management program that works with large commercial customers to
improve building operations and maintenance to save between 10 and 20 percent of electric
energy use; (3) NEEA's efforts in the development of energy building codes; (4) NEEA's partner
services and evaluation business unit that delivers services to help increase the cost efficiency
and value delivery of Idaho Power s energy efficiency programs; and (5) increasing market
adoption of energy efficiency programs in rural markets. The Application also points out that the
Company and NEEA have negotiated an agreement to help ensure that the Company s energy
efficiency expenditures are reasonable and effective. The Regional Energy Efficiency Initiative
Agreement is attached to the Application.
Subject to the Commission s approval, Idaho Power has committed to fund NEEA
based on a quarterly estimate of expenses up to a five-year total funding amount of $16 522 800.
ORDER NO. 31080
Idaho Power s share is 8.62% of NEEA's $191.7 million 2010-2014 budget.If the Joint
Application is approved, NEEA will bill Idaho Power for first quarter 2010 expenses payable
within 30 days of receipt of a Commission Order authorizing the Company s participation in
NEEA.
On March 24, 2010, the Commission issued a Notice of Application and Notice of
Modified Procedure that, among other things, established a 30-day period for interested parties to
file written comments and a 10-day period for filing reply comments. Order No. 31032. The
comment period ended May 3 , 2010. Written comments were filed by Snake River Alliance
Idaho Conservation League, the Industrial Customers of Idaho Power, Commission Staff, and
two members of the public. One public comment supports Idaho Power s continued membership
in NEEA, the other objects to any increase in customer rates.
WRITTEN COMMENTS
Idaho Conservation League
The Idaho Conservation League (ICL) supports Idaho Power s request for approval to
continue its participation in NEE A and suggested increased rigor of program evaluation and
third-party evaluation, measurement and evaluation of energy savings. ICL expressed concern
however, that Idaho Power s increased funding for NEEA may reduce the funds available for
other efficiency programs that might have more immediate results. ICL acknowledged that if the
current rider funds prove to be insufficient, Idaho Power may seek an increase in the Energy
Efficiency Rider "at a time when the public is faced with a myriad of other piecemeal rate
increases." ICL Comments, p. 2. ICL is cognizant of the negative public reaction to Idaho
Power s current. piecemeal rate filings, and believes the Commission "should require Idaho
Power to address efficiency in a comprehensive manner that includes the amount of the rider
prudency review of prior spending, and examination of the entire suite of efficiency programs.
Id.
Snake River Alliance
Snake River Alliance also supports the Joint Application to continue Idaho Power
participation in NEEA's programs. Further, the Alliance believes Idaho Power s new
participation level of 8.62% of NEEA's $191.7 million for 2010-2014 is reasonable and
represents a prudent investment of customer dollars. The Alliance believes Idaho Power
participation in NEEA has resulted in energy efficiency gains that would not have occurred
ORDER NO. 31080
absent NEEA's role in Idaho, or that would not have occurred as quickly as they did. The
Alliance believes the benefits include: the ongoing success of the Idaho Integrated Design Lab
which is funded in part by Idaho Power and NEEA; increases in the percentage of Energy Star
northwest residential programs; partnerships with large Idaho Power customers to promote
additional energy efficiency measures and to promote marketing of energy efficient appliances
and electronic devices; and development of the Idaho energy codes collaborative to promote and
implement progressive energy codes.
The Alliance initially was hesitant to fully support the Application because of a
concern that using the Energy Efficiency Rider for $16 522 800 over a five-year period will
reduce the total amount of Rider dollars available for the Company s DSM programs. The
Alliance is satisfied, however, that the increased investment is worthwhile given the
Commission s approval of an increase to the Rider from 2.5% to 4.75%, and given NEEA'
ability to leverage utility and other contributions to achieve greater regional gains and market
transformation success than if those efforts were made by individual participants. Finally, the
Alliance stated its expectation "that the Commission will continue to ensure Idaho Power
NEEA contributions and the programs they are funding are verifiably prudent and in the best
interest ofIdaho Power customers." Alliance Comments, p. 3. The Alliance recommended the
Commission give strong consideration to the merits of an independent monitoring and evaluation
process to provide customers confidence that their energy dollars are being deployed as
effectively as possible.
Industrial Customers of Idaho Power
The Industrial Customers (ICIP) recommend that the Commission deny the Joint
Application to authorize Idaho Power s continued participation in NEEA. ICIP believes an
increase in funding of NEEA by Idaho Power will result in a decrease of funding for some of the
Company s DSM programs. ICIP believes the Application to increase NEEA's share of Idaho
Power s Rider funds "must demonstrate NEEA's five-year business plan will result in more
energy savings to Idaho ratepayers than could be achieved with alternative use of those funds.
ICIP Comments, p. 3. ICIP states that recent efficiency programs for Idaho Power s industrial
and large contract customers achieved a total resource cost of 2.4 cents per kWh saved and a
utility cost of 1.3 cents per kWh saved. ICIP Comments, p. 4. In contrast, NEEA projects future
costs of 3.5 cents per kWh, and these costs are directed at market transformations which are
ORDER NO. 31080
more difficult to evaluate. ICIP argues that using Rider funds "out of state and pooling them
with funds from other entities to be spent on regional programs makes it difficult to track the
funds and benefits.Id. ICIP does not dispute the potential for general, societal benefit of
NEEA's efforts, but questions whether most of NEEA's programs directly reduce demand on
Idaho Power s system. For example, ICIP notes that the ENERGY STAR program is designed
to improve energy efficiency of home heating and cooling or water heating. According to the
Joint Application, however, less than 10% of Idaho Power s customers use electric resistance
space and electric water heating for their homes. ICIP Comments, p. 5. ICIP argues that while
promoting ENERGY STAR homes is commendable in general, it does not achieve the targeted
electricity demand reductions the Commission should require for the benefit of Idaho Power
ratepayers.
ICIP is also concerned that it is not clear that NEEA and Idaho Power plan to evaluate
the direct benefit of NEE A's programs to Idaho ratepayers who are funding them , or to evaluate
whether Idaho ratepayers are receiving a fair energy saving benefit for the NEEA contribution.
ICIP Comments, p. 6. ICIP believes that in light of the difficulty in tracking the benefits of
NEEA's programs, third-party review of those programs and their cost-effectiveness for Idaho
ratepayers is essential. ICIP concludes that "Idaho Power should spend the DSM money on
programs that provide easily measurable reductions in demand on Idaho Power s system, not on
increased funding of NEE A's broadly focused, regional , market transformation programs." ICIP
Comments, p. 7.
Commission Staff
Staff noted in its comments that Idaho Power s share of NEE A funding is projected to
increase from 6.4% of the total or $1.3 million per year in 2009 to 8.6% of NEEA's annual
budget, or approximately $3.3 million per year. Staff notes that Idaho Power s agreement with
NEE A states that "NEEA will deliver a minimum energy savings that allows each funder to
satisfy its governing regulatory body that its investment of ratepayer funds is justified.Staff
Comments, p. 4. If NEEA is not able to deliver cost-effective programs to Idaho Power
customers, then Staff believes that it would be prudent for Idaho Power to terminate its
participation in NEEA.
Staff noted that the Commission has previously directed Idaho Power to pursue all
energy efficiency that it can cost-effectively acquire. If Idaho Power has analyzed the cost-
ORDER NO. 31080
effectiveness of participating in NEEA programs and determines that the benefits will exceed the
costs, then Staff recommends the Company continue to participate and the Commission should
authorize Idaho Power s use of energy efficiency tariff rider funds for that continued
participation.
Idaho Power Reply Comments
Idaho Power filed reply comments addressing some of the issues raised by the other
parties ' comments. In response to comments suggesting the need for an independent monitoring
and evaluation by a third party, Idaho Power comments make clear that "NEEA programs are
evaluated by independent third parties on a regular schedule." Idaho Power Reply Comments
, p.
4. The program evaluations are made available to the public on NEEA's website and in the past
have been filed in Idaho Power s annual DSM reports with the Commission.
The Company stated that NEEA excels in regional market transformation to influence
real energy use changes by customers, but acknowledged that "it can be difficult to tie the
benefits of market transformation back to Idaho Power customers in a quantifiable manner.
Idaho Power Reply Comments, p. 3. To address its own concern regarding whether the benefits
described in the Application justify the cost of participating in NEEA, the Company states that it
engaged in extensive negotiations with NEEA to allow for active management by the Company
and an opportunity to discontinue its funding if Idaho Power determines that would best serve its
customers. Id. Additionally, Idaho Power recognizes that Commission approval of its
participation in NEEA will not end a review of the prudency of the expenditures. The Company
acknowledged "that the Commission s examination of its management of rider funds will occur
when the Company files its annual DSM report and seeks a prudency review of the associated
expenditures." Idaho Power Reply Comments, p. 2.
COMMISSION DISCUSSION
Based on the record presented, the Commission has determined it is appropriate to
approve the Joint Application and authorize Idaho Power s continued participation in NEEA as
requested. However, our approval is not without reservations. Idaho Power s agreement with
NEEA obligates the Company, subject to Commission approval, to provide payments over a
five-year period totaling $16 522 800. This amount equates to approximately $3.3 million per
year, a significant increase over the $1.3 million paid by Idaho Power in 2009. The increase
results from a significant reduction in Bonneville Power Administration s share of NEEA'
ORDER NO. 31080
funding, as well as a near-doubling of NEEA's budget from $20 million in prior years to $38
million in 2010. Staff Comments, p. 3.
The Application and the comments of ICL, Snake River Alliance, and Staff identify
actual energy efficiency program benefits resulting from NEEA's efforts. For example, NEEA
worked with two ofIdaho Power s largest hospital customers to reduce their energy consumption
by 10 to 20 percent. Application, p. 5. From 2004-2009, NEEA worked with 11 food processing
facilities in Idaho to implement energy management practices, resulting in "validated savings of
1.7 aMW and another 2 aMW of projected near-term savings." Application, p. 6. Staff stated
that the savings NEEA delivers by its programs are "cost-effective, reasonable compared to
alternatives, and result in a net benefit to Idaho Power and its customers." Staff Comments, p. 4.
Although the Industrial Customers oppose the Application, ICIP stated it "does not dispute the
potential for general, societal benefit of NEEA's efforts, and some individual ICIP members
have received some benefit from working with NEEA." ICIP Comments, p. 5.
As Idaho Power acknowledged in its reply comments, Commission approval of the
Company s participation in NEEA does not constitute a determination that the use of Rider funds
for NEEA's activities is a prudent use of those funds. The Application states that Idaho Power
agreement with NEEA requires it to "report Idaho Power s share of total regional savings in
proportion to their (sic) share of the five-year funding for NEEA for 2010-2014 at 8.62 percent."
Application, p. 13. In other words, Idaho Power is to receive an evaluation and report indicating
the Company is receiving a value commensurate with its annual investment. According to the
Application, NEE A will provide annual operating plans describing how NEEA will achieve its
goals and objectives. Application, p. 12. The Commission expects the Company to critically
analyze the NEE A reports and also provide them to the Commission as part of the Company
DSM reporting requirements.
The Commission has encouraged Idaho Power to increase its funding of DSM and
energy efficiency programs in the past several years, and recently approved an increase in the
Energy Efficiency Rider to 4.75% of sales revenues to support those programs. The Rider funds
are provided by customers and are not unlimited. The Commission expects Rider funds to be
used judiciously to ensure customers receive tangible benefits from their payments to support
energy efficiency programs. We recognize that some of NEEA's programs result in actual
benefits to customers, especially over time, but that the actual benefit may be difficult to quantify
ORDER NO. 31080
in the short-term.Nonetheless, when Idaho Power in the future requests a Commission
determination that its use of Rider funds was prudent, it must demonstrate a sufficient benefit to
customers resulted from the Company s participation in NEEA. The Commission s approval of
the Company s continued participation in NEEA, and the use of Rider funds to pay for that
participation, is not a determination of prudency.
ORDER
IT IS HEREBY ORDERED that the Joint Application of Idaho Power Company and
the Northwest Energy Efficiency Alliance for authority to fund the Company s continued
participation in NEEA, and the use of Rider funds for that purpose, as requested in the
Application, is approved.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
ORDER NO. 31080
DONE by Order ofthe Idaho Public Utilities Commission at Boise, Idaho this /:J..
+-"
day of May 2010.
~/. ~~
D. KEMPT , P IDENT
RSHA H. SMITH, COMMISSIONER
~~~
MACK A. REDFORD, COMMISSIONER
ATTEST:
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D. Jewell
Commission Secretary
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ORDER NO. 31080