20110517order_no_32245.pdf

Office of the Secretary
Service Date
May 17,2011
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AN INVESTIGATION )
OF APPROPRIATE COST RECOVERY )CASE NO.IPC-E-1O-27
MECHANISMS FOR IDAHO POWER’S )
ENERGY EFFICIENCY PROGRAMS )ORDER NO.32245
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)
On October 22,2010,Idaho Power Company filed an Application requesting that the
Commission issue an Order “accepting the Company’s demand-side resources business model.”
Application,p.1.Idaho Power identified several objectives in its Application,including addressing
a growing negative balance in the Energy Efficiency Rider account and implementing an
opportunity for the Company to earn on its investments in demand-side resource (DSR)programs.
Application,p.5.Currently,all costs for DSR programs are recovered through the Energy
Efficiency Rider (Schedule 91),which is presently 4.75%of base rates.The Rider balance has been
negative since April 2008,and had grown to more than $16 million.Application,p.5.The
Company estimated a 2010 year-end negative balance of $17,009,140 in the Rider account,
increasing to $29,677,151 in 2012 if not addressed.
The Application sought authorization to implement ways for the Company to recover the
costs of some energy efficiency programs;specifically,the Company proposed to (1)move certain
demand response incentive payments into the annual Power Cost Adjustment on a prospective basis
beginning June 1,2011;(2)establish a regulatory asset for Custom Efficiency program incentive
costs beginning January 1,2011;and (3)change the carrying charge on the Energy Efficiency Rider
from the customer deposit rate to the Company’s authorized rate of return.Application,p.1.The
Company projected that if the Commission implements the first two proposals,the 2010 Rider
balance of negative $17 million would shrink to a negative $3,356,306 in 2011,and start reducing
the negative balance in the Rider account.
On November 24,2010,the Commission issued a Notice of Application and Notice of
Intervention Deadline,Petitions to Intervene were filed by the Industrial Customers of Idaho
Power;the Idaho Conservation League,Northwest Energy Coalition and Snake River Alliance
(Conservation Parties);the Idaho Irrigation Pumpers Association,Inc.;and the Community Action
Partnership Association of Idaho (CAPAI).On January 14,2011,the Commission issued
Procedural Order No.32160 establishing a schedule for processing the case,including a settlement
ORDER NO.32245 1
conference scheduled for February 7,2011.The parties subsequently proposed a new procedural
schedule,anticipating that a settlement agreement would be filed with the Commission.On
February 14,2011,the Commission issued Procedural Order No.32178 vacating the existing
schedule and adopting a new schedule,providing for the filing of comments and a hearing on March
30,2011,for oral argument on the proposed settlement agreement.
On March 3,2011,Idaho Power filed the Stipulation and Motion for Approval.The
Stipulation was signed by Idaho Power,Commission Staff,CAPAT,and the Conservation Parties.
The Stipulation proposed recovery of incentive payments for three programs in the PCA,with an
adjustment to separate the DSM costs and allocate them to each customer class based on the amount
that would have been recovered from each class through the Rider.The Custom Efficiency
incentive payments would be capitalized as the Company requested,but with a seven-year
amortization period instead of four.Finally,the Stipulation provided that the carrying charge for
the Rider deferral balance would not be increased from the 1%rate,equal to that on customer
accounts,currently in place.
The Industrial Customers opposed the Stipulation,arguing that implementation of the
proposed changes is tantamount to increasing the Energy Efficiency Rider from 4.75%to 6.6%.
The Industrial Customers believe “the proposal simply masks increased conservation expenditures,
and thereby would authorize substantial additional rate recovery for demand-side programs from
that currently authorized for Idaho Power.”Reading Direct,p.6.
Idaho Power,Commission Staff,and the Conservation Parties identified reasons to
support the cost recovery changes proposed in the Stipulation.The Conservation Parties note that
the Commission has “steadfastly”directed Idaho utilities to pursue all cost-effective DSM
programs.The Conservation Parties believe the proposal establishes the proper regulatory structure
to remove economic disincentives for Idaho Power to invest in DSM.Hirsh Direct,p.2.Staff
supported the Stipulation as providing a balanced approach for the Company to recover DSM
program costs.Staff noted that demand response programs that are viewed as capacity resources
with a variable payment from year to year should be treated more like capacity-related supply-side
resources with cost recovery through base rates and PCA true-up.Lobb Direct,pp.7-8.Once some
DSM costs are moved to base rates,Staff believes they can be “more effectively evaluated and
incorporated in overall customer rates as part of a general rate case.”Lobb Direct,p.8.
ORDER NO.32245 2
On April 1,2011,the Commission issued final Order No.32217 denying approval of the
Stipulation filed by the parties.The Commission recognized and stated its appreciation for Idaho
Power’s commitment to improve its DSM programs,including programs that provide direct
incentives to customers to use energy efficiently and wisely.Order No.32217,p.4.The
Commission also noted the Company’s enlarged conservation programs have resulted in increased
program costs and Commission-approved increases in the Energy Efficiency Rider.Although the
Commission did not approve the Stipulation,the Commission recognized that the “funding
adjustments proposed by Idaho Power in this case ultimately may be appropriate to ensure DSM
programs are adequately funded and that the Company recovers approved expenditures in a timely
manner.”Order No.32217,p.5.The Commission did not approve the Stipulation,finding that
issues raised by the proposals should be more carefully scrutinized in a rate case.Finally,the
Commission recognized and shared the parties’concern over the amount of the Energy Efficiency
Rider deferral balance.The Commission determined to allow Idaho Power to recover $10 million
in DSM expenditures that have already been deemed prudent by the Commission for recovery in the
2011 Power Cost Adjustment,effective June 1,2011.
On April 22,2011,Idaho Power filed a Petition for Clarification requesting clarification
on three points.First,the Company contends that a possible interpretation of the Commission’s
decision suggests that Idaho Power ‘should limit its cost effective DSM expenditures to the level of
revenue collected by the Rider until these funding issues are resolved in a general rate case
proceeding.”Idaho Power Petition for Clarification,p.2.Accordingly,the Company requested
clarification,pending issuance of an Order addressing DSM funding to resolve the negative Rider
balance,clarifying that Idaho Power should continue to pursue all cost-effective DSM —even in
excess of Energy Efficiency Rider revenues.
Second,Idaho Power seeks clarification regarding its proposal to include demand
response incentive payments with its power supply expenses.The Company is evaluating whether
to file a general rate case this year that would encompass a decision whether to make a similar
proposal in its rate case.The Company requests clarification “to reflect that the Commission is not
philosophically opposed to the inclusion of Idaho Power’s demand response incentives in power
supply expenses.”Idaho Power Petition for Clarification,p.4.
The third clarification requested by Idaho Power relates to the Company’s proposal to
treat the Custom Efficiency program as a regulatory asset.The Company asserts that the
ORDER NO.32245 3
participants in the case supported the proposal,and that the sole point of disagreement among the
parties was in regard to the length of the amortization period.Approval of custom efficiency
incentive payments as a regulatory asset would not affect current cost allocations and Idaho Power
contends that “this type of accounting would begin treating demand-side investments similar to
supply-side resources —a goal supported by all participants in this case —and strengthen the energy
efficiency business model.”Idaho Power Petition for Clarification,p.5.Accordingly,the
Company requested the Commission clarify Order No.32217 to allow the Company to account for
incentives paid through the Custom Efficiency program as a regulatory asset beginning January 1,
2011,with an amortization period to be determined later by the Commission.
On April 29,2011,the Industrial Customers of Idaho Power (ICIP)filed an answer to
the Company’s Petition for Clarification.ICIP opposes any clarification of the Order,and
requested “that if the Commission is inclined to grant any of Idaho Power’s requests that the
Commission first hold an evidentiary hearing where all of the relevant issues can be fully vetted.”
ICIP Answer,pp.4-5.ICIP argues that no further clarification is required regarding the
Commission’s intention for Idaho Power to pursue cost-effective DSM,even if program costs
exceed funding provided by the Energy Efficiency Rider.ICIP notes that the Commission has
stated that the amounts it will authorize for DSM spending are not unlimited,referencing Order No.
3 1080,and that Idaho Power has placed itself in a difficult position by spending in excess of the
amount that is recovered through the Rider.ICIP Answer,p.6.ICIP argues that Idaho Power can
propose another cost recovery mechanism in a general rate case,or the Company can begin
reducing its spending to a level that is within the $38 million per year collected through the Rider,
and that no further clarification is needed at this time.ICIP Answer,p.6.
ICIP also asserts that the Commission should reject Idaho Power’s request for
clarification of the Commission’s “philosophical position”regarding recovery of DSM expenses as
power supply expenses.ICIP contends that “by granting the clarification sought by the Company,
the Commission may handcuff itself from being able to undo this far-reaching impact in a future
rate case.”ICIP Answer.p.7.
Finally.ICIP argues the Commission should reject the Company’s request for
clarification regarding treatment of the Custom Efficiency incentive payments.ICIP disagrees with
the Company’s assertion that the sole disagreement regarding the proposal was in regard to the
length of the amortization period.ICIP asserts that ‘if these $5 million in annual incentive
ORDER NO.32245 4
payments are rate based they must be treated as a system resource in a cost of service study.”ICIP
Answer,p.8.ICIP argues that to grant the Company’s request without addressing the cost-of-
service issues “would be a failure to address all of the relevant issues regarding whether the
Company’s proposal can be workable.”ICIP Answer,p.8.ICIP requested that if the Commission
is inclined to grant Idaho Power’s request,that the Commission approve a 12-year amortization
period.ICIP Answer,p.9.
COMMISSION FINDINGS
The Commission issues this Order in response to Idaho Power’s Petition for
Clarification to assist the Company in furthering its cost-effective efficiency programs and to allay
any undue concerns resulting from the Commission’s disapproval of the Stipulation filed in the
case.First,the Company should not regard the Commission’s Order as reflecting in any way a
desire to scale back on cost-effective conservation programs.Although the Commission,like the
parties,is concerned with the growing balance in the Rider deferral account,our decision is not a
signal that Idaho Power should limit its cost-effective DSM expenditures to no more than the level
of revenue collected by the Rider.Idaho Power’s energy efficiency programs are reviewed by Staff
and other third parties and then by the Commission to evaluate their effectiveness.Existing
processes enable the Company to determine which programs should be enlarged or scaled back,
based on an analysis of cost effectiveness.The Commission has and will authorize recovery of
program costs that are prudent,and is open to different proposals for recovery of costs.For
example,the Commission approved recovery of $10 million in Idaho Power’s annual Power Cost
Adjustment this year.In the meantime,Idaho Power should continue to pursue all cost-effective
DSM —even in excess of Energy Efficiency Rider revenues.
Second,the Commission affirms it “is not philosophically opposed to the inclusion of
Idaho Power’s demand response incentives in power supply expenses.”Idaho Power Petition for
Clarification p.4.As we stated in Order No.32217,the “funding adjustments proposed by Idaho
Power in this case ultimately may be appropriate to ensure DSM programs are adequately funded
and that the Company recovers approved expenditures in a timely manner.”Order No.32217,p.5.
The Commission again affirms that the Company’s proposal to include demand response incentive
payments in power supply expenses may be reasonable and appropriate.But that cannot be
ascertained until the specifics of a proposal are reviewed in a rate case.The Commission did not
intend to discourage presentation of a reasonable proposal.
ORDER NO.32245 5
Finally,the Commission will allow Idaho Power to account for incentives paid through
the Custom Efficiency program as a regulatory asset beginning January 1,2011,with an
amortization period to be determined later by the Commission.Establishing a regulatory asset
account for Custom Efficiency program incentive payments does not change current customer rates,
nor does it presume recovery of any amount without appropriate program cost reviews by the
Commission.That review process will also provide a basis for the Commission to determine the
appropriate amortization period.
PETITIONS FOR INTERVENOR FUNDING
On April 15,2011,Applications for Intervenor Funding were filed by the Idaho
Conservation League,Northwest Energy Coalition,and Snake River Alliance (Conservation
Parties)all of whom were represented by attorney Benjamin Otto.The Community Action
Partnership Association of Idaho (CAPAI)also filed an Application requesting intervenor funding.
No motions were filed in opposition to the intervenor funding requests of either CAPAI or the
Conservation Parties,which must be filed within 14 days after the request for intervenor funding is
filed.IDAPA31.01.01.164.
The Commission’s Rules of Procedure 161 through 165 provide the requirements for the
petitions for intervenor funding and the standards for determining approval of intervenor funding
awards.Rule 162 requires applications to include an itemized list of expenses,statement of
proposed findings,statement showing costs,explanation of cost statement,statement of difference,
statement of recommendation,and statement showing class of customers.IDAPA 31.01.01.162.
Rule 165 states the Commission must find that the intervenor’s presentation materially contributed
to the Commission’s decision,the costs of intervention are reasonable in amount,the costs of
intervention were a significant hardship for the intervenors,the recommendations of the intervenors
differed materially from the testimony and exhibits of the Commission Staff,and the intervenor
addressed issues of concern to the general body of users or consumers.IDAPA 31.01.01.165.
The Commission has reviewed the Applications for Intervenor Funding and finds that
they comply with the Commission’s Rules.Each of the Applications provides the information
required for an Application for Intervenor Funding,and the Commission finds that both intervenor
applications satisfy the requirements of Rule 165.The Commission specifically notes that the
requested intervenor funding amounts are reasonable.The Conservation Parties’request totals
$4,200,and CAPAI’s request is for $2,080.72.
ORDER NO.32245 6
The Commission approves the Application for Intervenor Funding filed by CAPAI in the
amount of $2,080.72,and also approves the Application for Intervenor Funding filed by the
Conservation Parties in the amount of $4,200.Both awards of intervenor funding are chargeable to
the residential class of customers and will be an allowable business expense in Idaho Power’s next
rate case.See IDAPA 3 1.01.01.165.
ORDER
IT IS HEREBY ORDERED that Order No.32217 is clarified as set forth above in
response to Idaho Power’s Petition for Clarification to assist the Company in its furtherance of cost-
effective efficiency programs.
IT IS FURTHER ORDERED that the Applications for Intervenor Funding filed by
CAPAI in the amount of $2,080.72,and by the Conservation Parties in the amount of $4,200,are
approved.Both awards of intervenor funding are chargeable to the residential class of customers
and will be an allowable business expense in Idaho Power’s next rate case.
THIS IS AN ORDER ISSUED TO CLARIFY A FNAL ORDER.Pursuant to Rule 325
of the Commission’s Rules of Procedure,IDAPA 31.01.01.325,this Order does not suspend or toll
the time for the filing of a petition for reconsideration.See Idaho Code §61-626.
ORDER NO.32245 7
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this /7
day of May 2011.
PAUL KJELL R,PR SIDENT
MACK A.REDFORD,COMMISSIONER
4
ARSHA H.SMITH,COMMISSIONER
ATTEST:
I /
Jan D.Jewell
Commission Secretary
O:IPC-E-1O-27 ws5 Clarification
ORDER NO.32245 8