20120301SRA Comments.pdf

Comments of the Snake River Allance
On Idaho Power Companýs Application for Authority to .ÎI~t29 PH 3: 03
Schedule 54 - Fixed Cost Adjustment - From a Pilot Schedule to arb~w~jDlI, ¡ :;;
Permanent Schedule UTILITIES COMMISSION
Case No. IPC-E-11-19
Submitted by
Ken Miler, Clean Energy Program Director, Snake River Allance
RECEI nL)
March 1, 2012
The Snake River Allance appreciates the opportunity to submit these comments to the Idaho
Public Utilties Commission in docket IPC-E-1l-19, Idaho Power Company's request to make
permanent its fixed cost adjustment pilot program and to make it a permanent schedule.
The Snake River Allance (Allance) is an Idaho-based non-profit organization, established in
1979 to address Idahoans' concerns about nuclear waste and safety issues. In early 2007, the
Alliance expanded the scope of its mission by launching its Clean Energy Program. The Allance's
energy work includes advocacy for renewable energy resources in Idaho; expandeô energy
efficiency, demand response and other demand-side management programs offered by Idaho's
regulated utilties and the Bonnevile Power Administration; and development of local, state,
regional, and national initiatives to advance sustainable energy policies.
The Alliance has supported Idaho Powers fixed cost adjustment (FCA) mechanism from the
time it was adopted as a pilot in 2007. We have commended Idaho Power for its long-standing
effort first to implement the FCA pilot and then to make the mechanism permanent. For
reasons set forth below, the Allance recommends that the Commission grant Idaho Power's
application, which we hope wil be a preliminary step toward implementing a similar
mechanism at Idaho's other two investor-owned electric utilities.
THE INSTANT APPLICATION
This docket is the outgrowth of a number of earlier PUC cases, most recently Idaho Power's
2011 General Rate Case (IPC-E-11-08). In that case, which was subject to settlement
negotiations to which the Allance was a party, Idaho Power sought Commission approval of its
request to make the FCA mechanism permanent for Residential and Small General Service class
customers. On Sept. 23, 2011, Idaho Power submitted a Motion for Approval of Stipulation and
Motion Open Fixed Cost Adjustment Case in the General Rate Case (APPLICATION, PP 2-3). That
application included the settlement stipulation mentioned above, which was signed by all
parties to IPC-E-11-08 except one. The Commission issued Order No 32380 on Oct. 13 2011,
granting Idaho Power's request to remove the FCA issues from the General Rate Case and
initiate a separate proceeding to consider issues related to the FCA, including whether to make
it a permanent mechanism for Residential and Small General Service class customers
(APPLICATION, P. 3). Idaho Power initiated this case on Oct. 19,2011.
In its application initiating this case, Idaho Power outlines the mechanics of the FCA pilot (the
pilot lapsed Dec. 31, 2011). The Company also proposes to use the revenue required as
approved in IPC-E-ll-08 and as contained in the settlement stipulation as the basis for
establishing the allowed fixed cost recovery. As in the past, that amount is compared to the
actual fix costs recovered by Idaho Power and then weighed against weather-normalized sales
for the residential and Small General Service classes to determine the respective Fixed Cost
Adjustment (FCA).
Idaho Power further states that the purpose of the original Schedule 54 Pilot was to determine
the effectiveness of "removing the unintended rate design disincentive for the Company to
aggressively pursue DSAM programs (APPLICATION, P. 5). It is Idaho Power's conclusion -with
which the Allance agrees - that "The mechanism has proved to be fair to both the Company
and its customers, providing both refunds and surcharges."
The Allance also agrees with Idaho Power that Schedule 54 should continue to be confined to
the current classes, Residential and Small CommerciaL. For many reasons, there have been no
efforts to expand the FCA to other classes. We also concur that the magnitude of the "true-ups"
resulting from the mechanism have, during the course of the first four years of the pilot, been
extremely smalL.
SUBSEQUENT FCA FILINGS
Subsequent to the Commission's investigation in IPC-E-04-15, the case that began this
decoupling saga several years ago and that led to the FCA pilot in IPC-E-04-15 in March 2007,
Idaho Power has sought to convert the pilot into a permanent schedule. The Allance supported
Idaho Power's request to do so in IPC-E-09-28 in 2009, although the Commission decided to
keep the program as a pilot. In doing so in Order No. 31063, the Commission noted that,
according to comments in IPC-09-28, "The program results are also mixed as to whether the
objectives of an FCA are being met." More specifically, the Commission wrote, "Clearly Idaho
Power increased its DSM program expenditures in the past several years, but it is not enough,
as Idaho Powers reply comments imply, that the Company's investment in effciency programs
increased during the FCA pilot project. There must be a demonstrable nexus between the FCA
and the Companýs investment in efficiency programs and as noted in several comments, the
Company did not provide evidence that such nexus exists. It is undisputed the Company's
increased effort was prompted by several factors, including this Commission's approval of a
significant increase in the energy efficiency rider that funds Company efficiency programs.
Evidence suggests the FCA may have done little to spur Idaho Power's increased investment, at
least for residential customers." (ORDER No. 31063 P. 8).
In that same Order, the Commission took note of the Allance's involvement in this issue:
"The Snake River Alliance supports Idaho Power's request to make its annual fixed cost
adjustment program permanent. The Allance believes the pilot program has proven
that decoupling of energy effciency program costs from Idaho Power's energy sales
revenues through the FGCA is an effective mechanism to promote energy effciency for
the Company's customers. The Allance also acknowledged, however, that Idaho
Power's energy efficiency tariff rider, apart from the FCA, "has spurred impressive
growth in the Company's energy efficiency and demand response measures." SRA
Comments, p.2. The Allance believes that although the FCA may result in rate increases,
individual customers can more than offset that by a reduction in their bil due to the
Company's demand-side measures." (Order 31063 Pl.
DEMONSTRATING FCA'S EFFICACY IN PROMOTING NEW EFFICIENCY
The Allance supports Idaho Power's proposal to eliminate the reporting requirement in the FCA
pilot to demonstrate the ways it has increased its DSM spending and its investments in energy
efficiency as a result of the FCA. We believe that, after five years and for reasons outlined
below, such a reporting requirement is excessively burdensome and that existing reporting
requirements are sufficient to demonstrate the program's benefits -to the extent they can be
demonstrated.
As referenced in the passage above, we are aware that some have questioned the effcacy of
the FCA mechanism, or decoupling, in actually encouraging additional efficiency. We agree that
it can be difficult to empirically link the FAC to a utilitýs performance. The same might be true
when we look back to determine what roles, if any, the FCA, Idaho Power's ambitious DSM
expansion, or the Commission's decision to lower the energy efficiency tariff rider level from
4.75 percent to 4 percent in Order 3246 in IPC-E-11-08, the 2011 General Rate Case. In short,
many things may play into the performance of a utilty's efficiency programs, economic
conditions such as the recent recession among them, but after five years it may be placing too
much of a burden on the utility to establish beyond a doubt an exclusive, causal relationship
between DSM performance and the FCA.
In submitting its application in this case, Idaho Power included the testimonies of witnesses
Ralph Cavanagh of the Natural Resources Defense Council and Mike Youngblood of Idaho
Power. Those testimonies were prepared as part of the 2011 General Rate Case, but due to
settlement were not taken up in that case. However, as part of this discussion, we want to
support the testimony by Mr. Cavanagh, who said in part:
The FCA resulted in trivial rate adjustments that went both ways, and did not materially
affect rewards for saving electricity. As the Public Utilty Commission of Oregon found
when it followed Idaho's good example by adopting a decoupling mechanism for
Portland General Electric in January 2009, responding to analogous claims that
decoupling would rob customers of the rewards of conservation:
We believe the opposite is true: An individual customers action to reduce usage
wil have no perceptible effect on the decoupling adjustment, and the prospect
of a higher rate because of the actions by others may actually provide more
incentive for an individual customer to become more energy efficient."
(CAVANAGH DI P. 8)
Asked whether the FCA risks paying Idaho Power for savings that it did not achieve, Mr.
Cavanagh stated:
No, because the FCA does not "pay" Idaho Power any incremental amount for anything;
it is simply a mechanism that allows the Company to receive no more and no less than
the fixed cost revenue requirement per customer that the Commission has reviewed
and approved."
What is known, as referenced by Mr. Cavanagh, is that Idaho Power has made significant strides
in expanding its energy efficiency and demand response offerings, and that these programs
have delivered significant benefits to its customers both in reduced energy bills and also in
deferred capital expenditures for new supply side resources. This is one of the more significant
outcomes the Commission said it expected from the Idaho Power FCA: Large increases in the
size and availabilty of efficiency programs. More than four years' worth of FCA data, coupled
with minimal true-ups, have established the efficacy of the FCA mechanism as a sound
regulatory tool with which to 1) Remove disincentives for expanded DSM investments and 2)
Lead to deeper cuts in energy consumption. Absent the FCA or a similar mechanism, we are
concerned that utilities lack sufficient incentives to invest further in energy efficiency.
Moreover, while the FCA experience has on occasion resulted in very small increases to a
customer's rate, it must be remembered that the successes ofthe program have likewise
helped reduce that customer's overall bil.
We also note that energy effciency has been identified in the 2007 and proposed 2012 Idaho
Energy Plans as Idaho's priority electricity resource. Idaho's commitment to advancing an FCA,
decoupling, or related mechanism was also central to the state receiving energy "stimulus"
funds as part of the conditions for the state of Idaho receiving funds through the American
Recovery and Renewal Act of 2009 (H.R. l)(ARRA). As a prerequisite for receiving those funds,
Gov. Butch Otter wrote Energy Secretary Steven Chu on March 19, 2009, assuring the
Department of Energy that: "i have written to our Public Utilty Commission and requested that
they continue their successful decoupling effort and consider additional actions to promote
energy efficiency, consistent with the Federal statutory language contained in H.R. 1 and their
obligations to maintain just and reasonable rates, while protecting the public."
CONCLUSION
The Alliance appreciates this opportunity to provide its views on the future of Idaho Power's
FCA mechanism. We wholeheartedly believe that this mechanism has proven its value in
promoting electricity energy efficiency in Idaho. As important, we believe that the historic link
between volumetric sales and energy efficiency promotion can be decoupled.
Inasmuch as the Idaho Power FCA pilot expired Dec. 31, 2011, and is no longer in effect, we
support the Company's request that the Commission approve its Application to make Schedule
54 permanent effective Jan. 1, 2012. We believe the request is timely given the need to
effectively track future FCA adjustments, or true-ups.
Finally, we believe that after more than four years of data collection as part of Idaho Power's
FCA pilot, the time has arrived when the Commission should give serious consideration to
whether Idaho's remaining two investor-owned electric utilties should be directed to consider
adopting a similar mechanism on a pilot basis to determine whether it can deliver similar
favorable outcomes.
Respectfully submitted,
Ken Miler
Clean Energy Program Director)
Snake River Alliance
208 344-9161
km iller(gsna keriveralliance .org
www.snakeriveralliance.org