20100422Comments.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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2010 APR 22 Mi 8: 01
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID 83702-5918
Attorney for the Commission Staff
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. )
)
)
CASE NO. IPC-E-10-4
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Weldon 8.' Stutzman, Deputy Attorney General, and in response to the
Notice of Application and Notice of Modified Procedure issued in Order No. 31032 on
March 24, 2010, submits the following comments.
BACKGROUND
On February 26 2010, Idaho Power Company (Idaho Power or the Company) and the
Northwest Energy Effciency Alliance (NEEA) filed a Joint Application requesting authorization
for Idaho Power to continue its participation in NEEA for the period 2010-2014 and to fund that
participation from the Company's Energy Efficiency Rider.
Idaho Power first began paricipating 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 effciency programs
STAFF COMMENTS 1 APRIL 22, 2010
and continue its participation 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, including fees paid to NEEA
through 2007. See Order No. 30740.
The Application states that NEEA's ongoing purpose is to improve efficiency of
electricity usage and reduce Northwest consumers' costs of energy effcient products and
services through market transformation. NEEA has been funded by or through electricity
utilities in the four northwestern states, the Oregon Energy Trust and the Bonnevile Power
Administration since 1997. Idaho Power states that it can better leverage its market
transformation investments through NEEA's four-state pooled resources and that it is able to
influence NEEA's activities for its Idaho customers' benefit through its paricipation in that
organization.
The Application lists the four strategic business units of NEE A's business plan for 2010-
2014. These are: (1) Market Operations, which wil continue regionally coordinated market
transformation efforts in residential, commercial, industrial and agricultural sectors and in codes
and standards; (2) Emerging Technologies, which wil continue NEEA's role as an intermediar
between laboratories and markets; (3) Evaluation and Partner Services, which wil continue to
deliver services that increase the cost-effectiveness and value ofIdaho Power's energy efficiency
programs; and (4) Business Planning and Operations ,which includes developing and
implementing a portfolio management system to support project adoption, emphasis, and
termination decisions, as well as benefit/cost analyses and planing support. The Application
describes several specific examples of how NEEA's efforts have directly affected and will
continue to affect energy efficiency efforts of Idaho Power and its customers.
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 Effciency Initiative Agreement is attached to the Company's
Application. The Agreement commits Idaho Power to fund NEEA based on a quarterly estimate
of expenses up to a five-year total funding amount of $16,522,800, subject to Commission
authorization and early termination clauses. Idaho Power's share is 8.62% of NEE A's $191.7
milion 2010-2014 budget. If the Company's Application is approved, NEEA wil bil Idaho
Power for first quarter 2010 expenses payable within 30 days of receipt of a Commission Order
authorizing Idaho Power s participation in NEEA.
STAFF COMMENTS 2 APRIL 22, 2010
The Application and Agreement state that NEE A expects to achieve in the 2010-2014
time period 200 aMW (average megawatts) of total regional savings of which 100 aMW (i.e.
876,000 megawatt-hours per year) are "net market effects" of incremental energy savings
allocated to NEEA. i The Application further states that NEEA wil report Idaho Power's share
of savings in proportion to its share of funding, i.e. 8.62%. The Agreement states that Idaho
Power's savings wil be reported somewhat differently, i.e. as "...not less than 8.62%, or Idaho
Power's equivalent funding share..."
STAFF ANALYSIS
Staff has closely observed NEEA's market transformation efforts since 1997 as well as
Idaho Power's own energy effciency efforts and believes they have been, and likely wil
continue to be, complementary in planing, implementing and evaluating cost-effective energy
effciency.
In 2009 and in prior years, Idaho Power's share of NEE A funding was about 6.4% of the
total or $1.3 millon per year. Idaho Power's funding share for the 2010-2014 period has been
increased to 8.6% and NEEA's average budget over that period is expected to be nearly double
what it was in prior years ($38 milion vs. $20 milion). Thus, Idaho Power's average annual
obligation is expected to be about $3.3 milion. Idaho Power's increased share of the budget is
due primarily to a large reduction in Bonnevile Power Administration's share - all other
funders' shares were increased to make up the difference. NEEA's 2010-2014 Business Plan
presumably presents reasonable justification for the increased budget as indicated by approval of
it by NEEA' s board of directors on which Idaho Power is represented.
Given the level of Idaho Power's funding commitment in the Agreement ($16.5 milion
over 5 years or an average of $3.3 milion per year), the specified exceptions to funding and
early termination clauses are appropriate, i.e. Idaho Power may reduce or discontinue funding
due to lack of Commission approval, legislated restructuring, changes in NEEA's bylaws,
NEEA's board of directors determines further investments are not warranted, or in the event that
Idaho Power has concerns about NEEA or its staff for which mediation is not successfuL.
i "Net market effects" is used to describe savings that remain after "baseline savings" and "utilty savings" are
subtracted from total savings. NEEA and its participating utilties developed this nomenclature to avoid double-
counting savings and to avoid counting savings that would have occurred absent NEEA/utilty programs. The
arbitrariness of allocating savings among joint efforts is recognized as unavoidable. The 200/100 aMW savings
estimates represent the annual savings occurring at the end of2014 due to program efforts from 2010 through 2014.
STAFF COMMENTS 3 APRIL 22, 2010
The Application's statement that NEEA wil report Idaho Power's share of savings in
proportion to its share of 8.62% of funding (p. 13) is different than the Agreement's statement
that "Idaho Power's share of total regional savings wil be not less than 8.62%, or Idaho Power's
equivalent funding share..." (p. 2); the former suggests savings estimated as a percent of funding,
while the latter suggests a savings floor. Although the statements seem both unnecessar and
insuffcient, Staff is not paricularly concerned about them, given that the Agreement also states
that "NEEA wil deliver a minimum energy savings that allows each fuder to satisfy its
governing regulatory body that its investment of ratepayer funds is justified." (p. 2) It is possible
that NEEA wil not be able to deliver at least 8.62% of its savings to Idaho Power, but that the
savings it does deliver are cost-effective, reasonable compared to alternatives, and result in a net
benefit to Idaho Power and its customers. IfNEEA is not able to deliver cost-effective and
reasonable value to Idaho Power (with proof assisted by zip code level savings reports), whether
or not it delivers at least 8.62% of its savings to Idaho Power's service area, then it would be
prudent for Idaho Power to terminate its participation.
In the past, NEE A has allocated savings to its paricipating utilties based on their
funding share. Going forward, the utilties and NEEA seem to agree that such allocation of
savings is insufficient due both to concerns expressed in the past and to the utilties' significantly
increased funding obligations. As a result, NEEA is committed to more closely tracking and
estimating where its savings geographically occur as evidenced by the commitment in the
Agreement to report savings at the zip code level where feasible (p.2). The exact processes for
such tracking and estimating are stil being developed. This issue warants continued attention
by Idaho Power and other Idaho utilties.
Both the Application and the Agreement discuss cost-effectiveness from only the total
resource cost perspective (TRC). However, it should be noted that the TRC is not the only cost-
effectiveness test used in Idaho or by NEEA. In Order No. 28894 the Commission directed
Idaho Power to evaluate cost-effectiveness from the utilty and paricipant perspectives, as well
as from the total resource perspective, and the Agreement does not alter that Order. See pages 5-
6 of the Idaho Public Utilties Commission's and the Idaho Office of Energy Resources'
December 2009 Report to the Idaho State Legislature for further explanation of appropriate cost-
effectiveness tests. See pages 73-75 ofNEEA's Business Plan (attached to the Application) for
NEEA's explanation of the TRC and "NEEA only" cost-effectiveness tests that it normally uses.
STAFF COMMENTS 4 APRIL 22, 2010
The Application states that NEEA's historical cost of electricity savings is less than 2t
per kWh (kilowatt-hour). For clarification, Staff is aware that NEEA includes in its cost per
saved kWh subtractions of non-electricity benefits (e.g. savings of natural gas, water, sewer,
detergent, labor, etc.) from the direct costs of the implemented programs. The non-electricity
benefits are substantial for some NEEA programs and sometimes their values are large enough to
result in negative costs per saved kWh. In sum, NEEA's cost per saved kWh is not directly
comparable to most utilties' stated costs per saved kWh. This difference in calculating costs
may become more important ifNEEA's cost per saved kWh increase as expected.
STAFF RECOMMENDATION
The Commission has previously directed Idaho Power to pursue all energy effciency
that it can acquire cost-effectively. Assuming Idaho Power has carefully analyzed the probable
cost-effectiveness of its continued participation in NEEA and determined that the benefits will
likely exceed the costs, then the Company is already obligated to paricipate. Staff sees no
compellng need for the Commission to authorize Idaho Power's continued paricipation in
NEEA or its funding of NEE A from its Energy Efficiency Tariff Rider. Nevertheless, Staff sees
no particular reason for the Commission to withhold the requested authorizations, given the usual
caveat that it would not serve as, or even imply, a predetermination ofprudency.
In conclusion, Staff recommends that the Commission authorize Idaho Power's use of
Energy Efficiency Tariff Rider funds for the Company's continued participation in NEEA. Staff
further recommends that the Commission remind Idaho Power that such authorization does not
alter prior orders regarding cost-effectiveness tests and does not establish prudency.
Respectfully submitted this i 1 nA day of April 2010.
Q~wcltzm~n
Deputy Attorney General
i:umisc:commentsipce i O,4wsla,doc
STAFF COMMENTS 5 APRIL 22, 2010
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 22ND DAY OF APRIL 2010,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. IPC-E-I0-04, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
LISA D NORDSTROM
BARTON L KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: lnordstromêidahopower.com
bklineêidahopower .com
RIC GALE
WARRN KLINE
IDAHO POWER COMPANY
PO BOX 70
BOISE ID 83707-0070
E-MAIL: rgaleêidahopower.com
wklineêidahopower.com
CLAIRE FULENWIDER
NORTHWEST ENERGY EFFICIENCY
ALLIANCE
529 SW THIRD AVE, SUTIE 600
PORTLAND OR 97204
E-MAIL: cfulenwiderênwallance.org
shermenetênwall iance.org
i harrisênwallance.org
~~.\rSEC TARY
CERTIFICATE OF SERVICE